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Trade finance: banks to support multiple platforms

The trades, executed by 10 companies via four banks on the platform – a consortium of Deutsche Bank, HSBC, KBC, Natixis, Nordea, Rabobank, Santander, Société Générale and UniCredit — have been described as the first commercially viable open account trades to harness blockchain technology.

The size of the transactions made by the unidentified European companies from the manufacturing, food, components and residential building sectors varied, but was typically less than £50,000.

One of the key elements of the platform is the ability to execute multiple transactions using smart contracts that allow clients to secure payments, settle trade transactions and automatically request financing or guarantees based on defined events and triggers.

Built on the IBM Blockchain Platform, operates across 11 European countries: Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden and the UK.

Deployment to customers in Europe will continue through the distribution channels of existing and future bank members, explains chief operations officer Roberto Mancone.

“As we mentioned at Sibos in Toronto in October 2017, after launching in the market we are now looking systematically to expansion beyond Europe in 2019,” he says.

Given that the obvious next step will be getting buy-in from additional banks and their customers in Europe and further afield, Euromoney asked Vinay Mendonca, global head of product and propositions, global trade and receivables finance at HSBC, how long it would be before the platform is fully operational and delivering an enterprise level, cost-effective solution beyond Europe.

“ is going to be delivered in phases and this announcement marks the first critical phase of delivery,” he says. “We aim to deliver a fully commercialized, enterprise-level solution for the European market by the end of this year.”

One of the limitations of the service is that the parties on each side of the transaction have to bank with one of the members of the consortium.

Non-bank operators

When asked whether he could envisage licensing the platform to non-bank operators, such as fintechs or challenger banks,’s Mancone – who has previously referred to the potential for expanding the service offering by partnering with third-party providers — merely observed that if additional partners provide value-added functionality and services, would be more than willing to analyse possible cooperation.

Vinay Mendonca,

HSBC’s Mendonca was more forthcoming.

“We aim to develop a full trade ecosystem, hence it is not only conceivable but part of our strategy to involve all key counterparties involved in trade that can add value to the end users,” he says.

“Growing the network will be critical to our success and we would welcome large and small banks alike to join the platform.” is not the only blockchain-based initiative targeting trade finance.

An even more diverse group – which also includes HSBC as well as Bangkok Bank, BBVA, BNP Paribas, ING, Intesa Sanpaolo, Mizuho, RBS, Scotiabank, SEB and US Bank – has developed an app on R3’s distributed ledger platform Corda, to digitize letters of credit.

R3 is also involved in the Marco Polo trade finance initiative alongside TradeIX, while in April, Batavia – a consortium of BMO, CaixaBank, Commerzbank, Erste Group and UBS that is also using the IBM Blockchain Platform – announced it had completed its first live pilot transactions.

‘Welcome development’

Mancone describes the existence of other blockchain-based trade platforms as a welcome development, suggesting that increased investments by multiple players will speed up the process of trust, acceptance, awareness and usage.

“ is a platform which is ready in the market and allows banks and clients to benefit from future releases and functionality without requiring investment in equity or in technological expertise,” he says.

“We look at other platforms with interests and we welcome an enlargement of the ecosystem for the benefit of the clients.”

Mendonca accepts that multiple blockchain-based trade platforms are under development, but says each of them addresses a different part of the puzzle.

“For example, the platform deals with open account trade transactions, whereas the platform we are working on with R3 deals with digitized letter of credit transactions,” he concludes.

“For this reason, these platforms can provide complementary services. We expect there to be some convergence over time, but during the rapid growth phase we expect banks will need to support several platforms.”

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