- Focus Areas
Seven banks, including BNP Paribas, HSBC, ING, BNY Mellon and State Street, have joined forces with R3 and Finastra to develop a blockchain-powered marketplace for syndicated loans. The first pilots have already been successfully completed.
With the early support of seven global banks (two of which do not yet wish to be named), the platform will cover 10% of the syndicated loan market when live next year.
The aim of the new platform, which is called Fusion LenderComm, is to drive transparency and efficiency in the syndicated loan market by improving the data sharing between agent and lenders.
It will expose real-time credit agreements, accrual balances, position information and detailed transaction data to lenders, directly from agent bank loan servicing platforms such as Finastra’s Fusion Banking Loan IQ.
According to Ian Morris, head of product management, corporate and syndicated lending at Finastra, the company started development of the platform early this year and the first set of pilots on the current prototype concluded in August. The intention is now to push the platform into production and make it available to users next year.
“More pilots are planned in the coming month. Development sprints continue towards the final objective of go-live next year,” Morris tells GTR, adding that the parties welcome more lenders and agent banks to join the platform.
For now, the platform is merely designed for participants to view data, but it will be expanded at a later state, Morris explains.
“The initial release will allow participants to view their data, but the goal for future releases will enable the exchange of information between agents and lenders and ultimately include smart contracts,” he says.
The immutable ledger will maintain all transaction history, giving every lender a personal view of deals they participate in and a time-stamped audit trail. In a statement, the parties say the platform will slash the operational cost and burden of agent-to-lender administration and provide accurate information to lenders on demand to optimise loan portfolios.
The fact that the collaboration has already attracted approximately 10% of the global syndicated lending market “demonstrates the appetite to make this market utility a success,” says Simon Paris, deputy CEO at Finastra.
“As more participants join, we will quickly gain the critical mass to develop this into the leading marketplace for syndicated lending and loan trading,” he says. “No more will lenders find themselves an underserved part of the syndicated loan value chain. Where they have struggled with a lack of transparency and speed in accessing critical deal positions, Fusion LenderComm opens up new data plains beyond position reconciliation.”
Today, the exchange of information in the syndicated lending market is predominantly done manually, explains Ivar Wiersma, ING’s head of innovation. “This means that accessing deal data, including transparency into accruals and interest rates, can be a time-consuming process. The initial focus of Fusion LenderComm is to automate the predominantly manual process of information sharing and to offer better insight in deal data. Further along the line, Fusion LenderComm will ensure a further increase in speed and cost reductions which may lead to smaller participations in syndicated deals and new investment opportunities for our clients.”
Fusion LenderComm will be underpinned by R3’s Corda platform, which R3 describes as “blockchain inspired”. Just this week, the company launched Corda version 1.0, pushing blockchain technology one step closer to production.
So far, most blockchain applications announced in the trade finance space have been powered by a competing framework, Hyperledger Fabric, backed by Linux open source technology. The Digital Trade Chain consortium and UBS’s Batavia platform are just two of many projects utilising this framework, both built by IBM.
But it seems that R3 is now catching up, having launched a range of new projects in the last couple of months. This includes a partnership with TradeIX to develop an open account trade finance platform as well as one for the processing of sight letters of credit.
In an interview with GTR on the launch of Corda 1.0, R3’s CTO Richard Brown argued that the roadmap for large-scale deployment is now clear and that it is time for developers and entities “to make their choice”.
“The whole idea of these platforms is to allow the users to reduce their costs and share data with privacy with their peers. If lots and lots of incompatible platforms get deployed it doesn’t work,” he said.
The post Seven global banks bring blockchain to syndicated lending appeared first on Global Trade Review (GTR).
ModulTrade, one of the first blockchain projects in the trade finance sector, comes to market with a new digital trade concept, to allow small businesses from around the world to trade efficiently, securely, and with ease. A smart-contract based eco-system, ModulTrade will provide micro, small and medium enterprises (MSME’s) a comprehensive range of services, minimise traditional charges and support cross-border trade with emerging markets.
While mainstream institutions have rested, the London based company has identified the struggles and barriers MSME’s face with the current banking system, and have undertaken the first steps in laying down the foundations to utilise blockhain technology to build a robust eco-system that is fit for purpose.
ModulTrade’s proposition leads the way in using blockchain technology, famously known for supporting the creation of digital currencies, to its full potential, and applies the ground-breaking lesson of the distributed ledger to trade, leaping over legacy systems and operations.
Within the ModulTrade Value Eco-system, millions of MSME’s will be connected to meet, commit and execute trade. Businesses will be matched with suppliers, with funds and reputation verified and clear trade ledgers, as goods are tracked to the point of delivery. As a result building trust and transparency, all the while expanding their reach further than currently possible, widening MSME’s status from local to global.
A disruptor in the market, the innovative core of ModulTrade’s proposition will democratize global trade by connecting the heart of blockchain technology to real life trade transactions, diminishing the lengthy letters of credit process, which often results in the end of the trade cycle for many MSME’s. With decisions made automatically through its’ smart-contract technology, ModulTrade’s Value Eco-system will completely streamline the full trade process, saving time and money.
Combining the development of ModulTrade’s Value Eco-system with the launch of the new ModulTrade crypto token (MTRc) will provide the golden ticket to buy and exchange directly within the platform. Architected on Ethereum and complying with the widely-accepted ERC-20 token standard, users of ModulTrade will be able to exchange value in real-time. MTRc will also be compatible with all ether wallets and can be easily added to common crypto-exchanges for trading.
With an average of 20 years of experience in financial trade, the ModulTrade team have joined forces to revolutionise the industry, with a shared passion to re-invent the way MSME’s operate and trade. On the concept, Evgeny Kaplin, ModulTrade CEO, commented: “We are passionate about giving all businesses, no matter their size or location, the same opportunities to build, develop and grow their companies akin to big corporations.
Our proposition aims to increase accessibility and minimise costs, and with smart-contracts and blockchain, we can mimic traditional banking systems, but at a transaction fee of as little as 1%; compared to current charges at 4-15%. Through our token sale, we want to empower MSME’s and with the support of participants, we hope to make the ModulTrade concept a reality.”
ModulTrade rises above others by creating opportunities for not just users of the eco-system, but also added benefit to the ongoing development of the technology and provides a networking platform for service providers.
The launch of ModulTrade’s token sale provides a means to scale out the current beta pilot and go global with a message of transformation and opportunity for all businesses, whatever the size, wherever the location.
For more information, visit https://modultrade.io/. ModulTrade pre-sale starts from 03 October 12:00pm CET. Main sale date will be announced.
MTRc’s are tokens in ModulTrade’s blockchain-based platform and value eco-system.
They are not refundable, nor are they securities or for speculation. There is no promise of future performance. There is no suggestion or promise that MTRc has or will hold a particular value. MTRc’s give no rights in the company and do not represent participation in the company. MTRc’s are sold as a functional utility. Any value received by company may be spent without conditions. MTRc’s are meant only for experts in cryptographic tokens and blockchain-based software systems.
The ModulTrade team aims to foster the next commercial revolution in trade finance, with the new concept developed in MIT during 2016-17 . ModulTrade will run off a smart-contract blockchain based eco-system, bringing together a comprehensive range of services for the full B2B trade cycle. Operating globally, the platform will allow for cross-border trade for emerging markets and micro, small and medium enterprises. The product will be accessible online and through smartphones, allowing complex trades to run in real-time, increasing efficiencies and lowering businesses overall costs.
ABOUT MODULTRADE’S FOUNDERS
Evgeny Kaplin, CEO
Russian born Evgeny has 17 years’ experience in trade finance and payments business and during his career successfully launched and run highly profitable global trade finance platforms at leading European banks. Evgeny has a global reach, having worked in key financial hubs, including Singapore, Geneva and London. He has fulfilled successful roles at top financial institutions including Cargill, Sberbank, McKinsey and Gazprom. Evgeny brings his extensive knowledge of the financial trade industry and business acumen.
Jean Chaanine, COO
Jean brings his 25 years of experience in technology and having adopted senior management and strategic roles in the banking sector, provides operational direction to the team. He has delivered projects at UBS, Credit Agricole Corporate Investment Banking, Sodexo, the French ministry of finance and Banque de France. The French national, with his entrepreneurial flair, is also co-founder of a digital concierge platform and an IoT services focused business.
Fedor Sapronov, Business development
Fedor has 17 years experience in corporate banking and investments with a thorough understanding in Lending, Project & Structured finance. He has held executive positions in top banking institutions such as Sberbank, Alfa-bank, Gazprombank.
Karthikeyan Kaliyaperumal, CTO
Karthikeyan has developed his career in Technology Strategy and Product Management during the 20 years since he began working in the sector. His experience working at fortune 500 companies including Aramark, Charles Schwab, Nielsen, brings sound and knowledgeable expertise in building supply chain, finance and marketing platforms. He has also managed global technology teams across Europe, Asia, LATAM and the US. Born in India, Karthikeyan now lives in the USA and provides the technical nous to the ModulTrade project.
Marco Rosso, Product development
Marco completes the ModulTrade team, providing consultancy in financial risk. He has 17 years’ experience in the EMEA financial services and banking, and has set up new business structures, developed cost of risk optimization models. He has consulted at the big four including Ernst & Young.
ABOUT MODULTRADE’S TOKEN SALE
|Pre-sale price:||1MTRc = 1ETH/700|
|Token sale price:||will be not less than 1MTRc = 1ETH/700 and determined 2 weeks prior to main Token Sale|
There will be a limited supply of 100 million MTRc in total.
40% will be distributed during Pre-Sale and Token Sale
Unsold MTRc tokens offered for sale will be destroyed and no more distributed after the Token Sale ends.
Timeline Pre-sale starts on October 03, 2017
Token Sale starts in November, 2017
Soft cap 15’000ETH
Hard cap to be announced 2 weeks prior the Token Sale
currencies ETH & BTC & Fiat currencies
|Discount||# of tokens to be sold|
|Token sale||Phase 1||25%||6,000,000|
+5% discount for the amount from 100 ETH
+10% discount for the amount from 1’000 ETH
Distribution MTRc tokens will be distributed in the following way: 40% (Pre-sale-10%, Token sale 30%); Post Sale: Product development 20%; Ecosystem creation 22%; Team 15% (5% will be distributed within 6 months after the Token sale is finished, 5% will be released after the 1st year, 5%- after the 2nd year); Advisory 3%.
Token purchase During Pre-sale purchases can be executed
ABOUT MODULTRADE’S GOVERNANCE
ModulTrade takes the safeguarding of all participants in the token sale seriously. Security is one of ModulTrade’s core principles, with the team taking several steps to provide the best possible governance of the token sale and protection of the platform technology. ModulTrade is working with professional and experienced financial consultants, applying best practice procedures to ensure a structured token sale. All steps have been taken to protect the participant, through implementing independent audits, validation of the ModulTrade proposition and a secure wallet controlled and protected by an independent qualified entity.
Understanding the risks of cyber hacks, ModulTrade is enforcing full cyber security across all ModulTrade online channels. An independent auditor has been recruited to ensure protection and participants funds are not jeopardised. In the event of a security breach, ModulTrade, with the help of cyber security experts and communications team, will inform participants of such and provide clear instructions.
Commerzbank, Bank of Montreal, Erste Group and CaixaBank have joined an initiative by UBS and IBM to build a new global trade finance platform powered by blockchain technology.
Under the name Batavia, the platform is an expansion of a proof of concept that IBM and UBS launched at Sibos in 2016 and have since concluded successfully.
The aim of the platform is to give organisations around the world a place to openly and easily build multi-party, cross-border trading networks worldwide. It will give participants in a trade transaction a shared, immutable record, which will improve transparency and efficiency, minimise the risk of errors and dispute as well as drive more trade business.
Among other things, transacting parties will be able to track the progress of a shipment. Agreements will be written into a computer code – a so-called smart contract – which enables payments to automatically be released incrementally along each step of the process. The platform will also facilitate the financing of transactions across all types of trade, whether goods are transported by air, land or sea.
Speaking to GTR, Fabio Keller, project lead for Batavia at IBM, says the development of the platform, which will be powered by the Hyperledger Fabric framework, has now commenced. The first phase involves the development of a minimum viable product (MVP) and the pilot transactions are scheduled to take place with customers next year. Only when pilots have concluded will the parties define the future timeline, including when the platform will go into production.
The four additional banks have joined to help scale up the project. Development will happen in consultation with transportation industry experts and the banks’ customers to ensure that the platform is flexible and intuitive and can be commercialised.
Keller expects to welcome new partner banks during this phase or immediately after. “The value sits in the network, and the larger the network, the better, so that we have real coverage over the whole globe. We would like to grow in a controlled manner, because if you have to find solutions among 50 banks, it’s impossible. You need to define the MVP with a small number of participants, then you can start growing,” he says.
A “cornerstone” of the platform will be connecting the smart contracts with the internet of things (IoT) sensors, which could automatically feed data (on, for example, the location of the goods) into the contract. This feature may however be tested only at a later stage, points out Keller.
It a statement, the banks conclude that by helping to connect participants in a trading network, the platform has the “potential to transform global trade”.
The open nature of Batavia, the statement says, will encourage broad participation by many banks, vendors and regulators, and will help open new trade corridors and bring new players into the market.
For one, Jordi Fontanals, CaixaBank’s COO, notes that not only will blockchain drive digitisation in the trade space, but, “more importantly it paves the way for international projects in collaboration with multiple partners” and the opportunity to bolster the bank’s foreign trade services.
The post More banks join UBS and IBM’s trade finance blockchain project appeared first on Global Trade Review (GTR).
Banking consortium R3 has pushed blockchain technology closer to production with the launch of its distributed ledger technology platform (DLT) platform, Corda v1.0, and called on banks to “make your choice”.
The platform, which the company describes as “blockchain inspired”, has been developed over two years with members of the consortium and will enable institutions to transact directly using smart contracts. As an open source platform, third parties can develop and implement applications, known as CorDappsusing Corda’s common code and protocols.
Corda v1.0 follows the open source release of the platform last year. R3 says it has now achieved stability of Corda’s core application programming interface (API) allowing for third parties to develop applications for the platform, with a guarantee that any future changes will not disrupt their work.
“The blockchain industry in reality is still quite young,” says R3 CTO Richard Brown to GTR.
“Many of these platforms are changing quite rapidly. What we delivered today will allow developers to plan and predict and hit deadlines. We committed today to keep the core designs, the foundations if you like, fixed. Which gives huge predictability and huge confidence to those building on top of it.”
Brown explains that by fixing the foundations, R3 has given away the right to change key parts later.
“I am aware of platforms that have plans to make quite significant changes that will force application developers to change their applications. We had to be very sure that our design was right and stable. It’s a big step and to my knowledge we are the first blockchain firm to make that commitment.”
“Time to make your choice”
Other platforms are also in the race to become the primary platform for trade finance. In July, Hyperledger released Fabric 1.0, which is backed by Linux open source technology, and also designed to be used for transactional operations.
In June, a consortium of seven banks announced they had chosen IBM to develop Digital Trade Chain (DTC), a blockchain trade finance platform for SMEs. When faced with a choice between Fabric and Corda, the developers went for Fabric 1.0.
Swift has also been working on a proof of concept (PoC) with the beta version of 1.0, for its nostro account reconciliation tool, within its global payments innovation (gpi) initiative.
Last month, R3 announced it has partnered with fintech firm TradeIX and 12 international banks to develop an open account trade finance application that will operate on Corda. The application will be co-developed with logistics companies and industry parties such as the ICC Banking Commission and the International Trade and Forfaiting Association (ITFA). However, the early users of the application will be only banks and their corporate clients.
As the race heats up, Brown argues that the roadmap for large-scale deployment is now clear and that it is time for developers and entities “to make your choice”.
“The whole idea of these platforms is to allow the users to reduce their costs and share data with privacy with their peers. If lots and lots of incompatible platforms get deployed it doesn’t work,” he says.
“If you work through just the economics of this, it all points to a small number of platforms gaining widespread adoption. [However,] it won’t be one – different platforms solve different problems, so it will be three or four different platforms.”
Commenting on Hyperledger’s release earlier this year, and the selection of Fabric 1.0 by DTC, Brown says that as premier members of the Hyperledger project, R3, like in all businesses, both competes and collaborates with different organisations: “With respect to Fabric, I think we’ve set ourselves on a deliberately different course. The way that Corda is being designed, the problems we are trying to solve and the approach we’ve taken is different. There are multiple platforms in the market for different use cases. I don’t expect Corda to be selected for each and every one of them.”
Diverse and rapid uptake expected
Having deliberately designed Corda for its members, predominantly large banks, the consortium says it has also seen a lot of engagement from other sectors including insurance, health care and government entities, as well as a large number of smaller scale startups.
“We have discovered through the open source community that people are finding use cases for it outside its original purpose. This tells me we have hit on the right design – if people are independently discovering that it’s capable of delivering,” says Brown.
With the launch of Corda v1.0, R3 now expects to see a ramp up in production deployment. So far numerous PoCs and pilots have been tested on the platform, which are now expected to go into production stage.
“My expectation is now that we have this commitment to API stability, the ramp up will be rapid. Those who may be waiting on the sidelines can now choose to engage with confidence,” says Brown.
“I suspect in the first half of next year we will be seeing publicised production deployment and then it will ramp up further later in the year.”
Meanwhile, at R3 the company plans to work on extra features for enterprise deployment and large-scale deployment over the coming months.
Risk and financial crime compliance solutions provider Accuity has expanded its global innovation team with two leadership appointments.
Neela Das has been appointed to lead the company’s global, multi-disciplinary innovation team, with regional hubs in London, Paris, Chicago and Singapore. She will be working with Ronald Hobbs, who has been appointed director of technology for innovation.
Das brings a wealth of experience working in disrupted markets. She held the digital director role at New Scientist, and as part of the senior management team developed its digital strategy. At Accuity, she will develop the innovation strategy, collaborating with the risk, compliance and payments business and technology teams across the globe.
Hobbs will lead the innovation team’s engineering experts, having been the technical brains behind Accuity’s dual-use goods trade compliance solution. He joins after multiple technical leadership roles within RBI International. As the industry has evolved so have the projects he has tackled, delivering everything from centralised matching and information retrieval systems to the secure cloud-based evolution of key software products.
Accuity’s innovation teams operate like startups within the larger organisation, working directly with clients to develop proof of concepts. Since 2015, the innovation team has tripled in size.
“Companies need to innovate constantly so they can respond to evolving regulation and new ways of working,” says Hobbs. “We look forward to creating cutting edge solutions for our clients. Going forward, Accuity will focus on utilising the latest technologies, such as distributed ledger technology, artificial intelligence, machine learning, predictive analytics and big data, to adapt to the rapidly changing and evolving financial landscape.”
Two companies in Hong Kong are to launch a blockchain-based solution for trade finance lending over the coming weeks.
Novamundo, a factoring company, has teamed up with CrptoBLK, a blockchain development company, to develop a solution that will help digitalise their lending process in Hong Kong and China.
Both companies are startups. Novamundo was launched in 2016 and is capitalised to the tune of HKD100mn (around US$12.8mn), targeting the small business market in Guangdong, with a view to moving into other regions of China. It is backed by “one of the three biggest family companies in Hong Kong”, which is providing most of their funding, according to the company’s president Cobe Tsang, who has previously held senior roles at Standard Chartered and Coface.
Tsang tells GTR: “We are targeting exporters and manufacturers in China and Hong Kong. Our deal size is around Rmb10mn (around US$1.5mn). The Chinese market is much bigger than Hong Kong, banks don’t want to lend to small private enterprises, only state-owned enterprises and listed companies.”
He explains that Novamundo’s financial backer is keen to exploit the size of the market in China, which yields about 10% return on average. Using a blockchain-powered solution, he says, will help reduce the risk of fraud and improve transparency. This will enable them to target smaller companies with different risk profiles. Returns in this case could be up to 15%.
The technology, meanwhile, is being developed by CryptoBLK, a tech startup headed by Duncan Wong, who helped author the Hong Kong Monetary Authority’s white paper on blockchain. It is being developed using R3’s Corda open source platform and will use distributed ledger technology to process the entire trade finance cycle, from purchase order to invoice.
Wong tells GTR the company selected Corda due to its access control and segregation of data features, which make it more appealing to financial institutions that wish to maintain confidentiality and keep proprietary information separate.
If the first three quarters of the year were dominated by banks’ proof of concepts in this space, then the last quarter may be when we see some actual commercial activity on the blockchain. However, it is appearing more likely that these developments will come from small companies and startups, rather than big banks.
The post Hong Kong firms to launch blockchain trade finance solution appeared first on Global Trade Review (GTR).
R3 has partnered with fintech firm TradeIX and 12 international banks to develop an open account trade finance application powered by distributed ledger technology (DLT).
The application will allow banks to automate pre- and post-shipment financing and risk mitigation for corporate buyers and sellers around the world. It will help simplify trade, improve visibility into trade flows and simplify access to credit and risk mitigation services throughout the trade lifecycle.
The banks involved are Bangkok Bank, Barclays, BBVA, Bladex, BNP Paribas, Commerzbank, CTBC Bank, ING, Intesa Sanpaolo, Shinhan Bank, Royal Bank of Scotland and Wells Fargo.
TradeIX, which recently launched a trade finance-specific open-source blockchain platform, will build the application, and pilots are expected to begin early next year. The initial development phase will create standard trade finance smart contracts on R3’s distributed ledger infrastructure Corda.
“The underlying DLT infrastructure is Corda, and then the APIs and all the trade finance specific applications and tools come from our platform,” David Sutter, head of platform strategy at TradeIX, tells GTR.
As previously reported by GTR, TradeIX started building its platform using Hyperledger Fabric. However, Sutter says the company made the decision to place their focus on Corda because it was technically a better fit for the purpose.
The application that TradeIX is building with R3 is an infrastructure on which banks and third party providers can develop specific solutions, Sutter explains.
“The initial project is about connecting buyers, sellers, banks, trade service providers in the open account ecosystem, connecting them all on one single information layer that collects critical trade data around purchase orders, invoices, financing activities. Then solutions are built on top of that.”
He says that current open account technology “is ageing” and that DLT can solve many of the challenges that exist in the market today.
“Within open account trade finance, we have some big and pressing issues. We have total lack of standards and interoperability in trade today, which has created a fragmented, tangled mess of open account systems that have a hard time speaking to one another.
“These systems end up blocking all the open account trade data and silos, making it harder to verify the data. And that drives real big fraud, compliance and other risks, which limits the market segments and types of customers that the banks can service on the open account side,” Sutter says.
DLT-powered infrastructure, on the other hand, would provide standardised processes for the entire sector, with a higher degree of interoperability and the ability to integrate with existing platforms. With improved transaction times, the reduction of risk and a real time visibility into “a single source of truth for trade data”, Sutter says, banks will be able to offer open account services and financing to more customers.
R3 and TradeIX are expecting the first pilots of the application to begin in February next year, following which they will expand the services and onboard additional members.
Speaking to GTR, Sophie Wiberg Holm, project lead at R3, says the application will be co-developed with logistics companies and industry parties such as the ICC and the International Trade and Forfaiting Association (ITFA). However, the early users of the application will be only banks and their corporate clients.
“Right now we are working with a number of corporates from the different financial institutions, preparing them for the pilot and validating come of the assumptions we are making and testing hypotheses. We will probably pilot first with six corporates or so and then expand the pilot slowly,” she says.
At a later stage, she adds, the application could be expanded to also involve other parties such as credit insurers.
Sutter adds: “In terms of when it goes to production still remains to be seen because that question depends entirely on how many banks are involved. If we hit our target of 20 to 25 banks, it will be quite some time before every bank gets into production,” he says, referring to the amount of banks the duo hopes to have onboarded by the end of 2018.
The launch of the open account application comes just two months after R3 announced that had worked with 13 banks to built a prototype application to streamline the processing of sight letters of credit. Some banks are engaged in both projects.
“The two applications complement each other nicely, and obviously down the road there is a larger strategy to see how these different trade finance initiatives can merge into a larger ecosystem of trade products,” Wiberg Holm says.
Meanwhile, banks participating in the project have claimed the initiative is ground-breaking and will enable them to provide flexible and efficient working capital finance solutions for their clients.
“We see this initiative as complementary with other initiatives and trade platforms. Building smart contracts to capture the supply chain finance business logic on DLT is an essential step that will significantly boost the trade finance ecosystem,” says Marguerite Burghardt, global head of the trade competence centre at BNP Paribas, which is also involved in R3’s letter of credit application.
“We are very excited about this new initiative, which has the potential to significantly boost the trade finance ecosystem,” adds Bernd Laber, group executive, trade finance and cash management corporate clients at Commerzbank. “Together with R3, other bank members and TradeIX, we aim to bring trade and supply chain finance business to the next evolutionary stage.”
The post R3 and TradeIX to build open account blockchain application appeared first on Global Trade Review (GTR).
The Dutch development bank FMO has come together with fintech firm Above & Beyond to launch an innovation programme that aims to stimulate collaboration between banks and fintech firms and accelerate financial inclusion in Africa.
FinForward is a nine-month programme that links banks in Africa with global fintech companies via an online platform. After being matched, FinForward will offer a sandbox environment where the parties can safely and securely test and integrate new financial technology solutions into the bank’s systems.
Speaking to GTR, Andrew Shaw, a senior fintech specialist at FMO, says the platform works like a “business-to-business app store”, where banks can “plugin” new digital and innovative solutions and services to their operations.
The initiative, he says, came out of an interview process with 65 of its financial institution clients around the world, who divulged their difficulties in finding, choosing, testing and implementing fintech solutions.
“One of the things they told us was that they really want to understand how fintech works and how they can integrate with it, but they find the massive world of fintech quite confusing. They don’t know which are the right to integrate to,” Shaw says.
FinForward will promote a range of solutions, from lending and alternative credit scoring to payments and cybersecurity. Shaw sees trade finance in particular as one of the key areas of African finance that could benefit from the programme.
What links the fintech companies is their ability to help banks reach groups that have traditionally been financially underserved – such as women-owned businesses and small enterprises – giving them better access to the financial system and financing.
EFL is one of the fintech firms taking part in the programme. It applies psychometrics and behavioural science (measuring borrowers’ character, abilities and willingness to repay a loan) to assess risk and make digital credit assessments of people who may lack the credit history that lenders usually require.
“That might be, for example, a woman-owned business in a country where women can’t own land and they don’t have collateral for a loan,” Shaw says. “So you are bringing in excluded businesses into the financial system and helping them to unlock their potential.”
About 100 fintech firms are already integrated into the platform from a previous programme run by Above & Beyond in Latin America. The initiators have now opened registrations for new providers and hope to “bring in some more Africa-centric fintechs and homegrown solutions”, Shaw says. The aim is to reach 200 solutions on the platform when the application round (which ends on November 25) and subsequent vetting process have taken place.
FMO expects to bring on at least 12 African financial institutions from its client network to the programme, which is sponsored through a Dutch government fund for lending to micro businesses.
The post Dutch programme to boost bank-fintech collaboration in Africa appeared first on Global Trade Review (GTR).
An increasing number of non-bank lenders are looking to initial coin offerings (ICOs) as a source of funds for trade finance lending.
ICOs – also referred to as token sales – are unregulated means of crowdfunding, using cryptocurrency. In theory, through an ICO, you can raise money from anybody, anywhere in the world.
This is done by issuing digital tokens, which in turn gives investors a stake of the company. Early backers are usually motivated by a prospective return on their investment, as a startup’s success would often translate into a higher token value.
For trade finance lenders, it offers access to an unorthodox – and, theoretically, unlimited – pool of investors in a market that is booming. In July, a report by research firm Autonomous found that startups had raised in total a record US$1.27bn in the first half of 2017 through ICOs, while the top four ICOs of the year, according to research firm Smith and Crown, have to date raised US$660mn between them.
However, the market has come under intense scrutiny in recent weeks. Unlike mainstream fundraising activity, ICOs are unregulated. The anonymity of the market and the connections with the dark web have led to fears over money laundering and links to other sinister activity.
In September, China banned ICOs outright, saying they left investors unprotected and dismissing the entire practice as “illegal fundraising”.
The Hong Kong Monetary Authority (HKMA) chief executive Norman Chan followed this up by claiming that “bitcoin or other digital currencies do not require holders to trade under their real name, which allows them to be used for money laundering activities”. Similar warnings have come from the Monetary Authority of Singapore and the Securities and Exchange Commission in the US.
But while companies in the space say they have heeded the warnings of regulators, it seems not to have dampened enthusiasm for a fundraising model which, if used and managed correctly, can be much quicker and more efficient than traditional channels.
Trade finance ICOs
The trend of trade finance ICOs is already underway, with invoice financing company Populous raising US$10mn in this manner in July. In fact, the startup sold out of its customised tokens in just five days.
GTR has spoken to a number of other companies in the process of arranging ICOs as a means of kickstarting their own lending operations, with the eventual aim of attracting institutional investment further down the line.
Harveen Narulla is the CEO of Kommerce, a Singapore startup that will launch an ICO in October, with a view to raising US$30mn to US$50mn by the end of November. The proceeds will help fund a three-year programme of financing highly-liquid, fast-moving commodities such as cooking oil, coffee, sugar and rice into Africa.
Narulla is also the founder of Pan-African Logistics, a company that brings the same sorts of goods into Africa. He has seen the pain point, and thinks an ICO will provide Kommerce with the start-up capital to support small trading companies on a continent starved of bank debt.
“A container of cooking oil will cost you less than US$20,000. We want to put money towards a trade that churns frequently. It takes 45 days for an end to end transaction to complete. We want to build a stable of such regular transactions. If a merchant is bringing in five containers but thinks he can do 10, we can deploy the cash to acquire 10 for him. We don’t want to do ad hoc deals, but regular, repeatable deals,” he tells GTR.
Launching an ICO allows Kommerce to bypass the “venture capital dance”, says Narulla, who has been involved in that space for a decade.
He explains: “It’s a desire to bypass talking at people who don’t understand the subject or are already doing well enough financing developed markets, so it’s not worth their while looking at new markets. We can also bypass Africa sceptics, because there are many and with good reason. Our subset of people is very narrow, so instead of spending one or two years flying around the world, I’d much rather go to people who are willing to finance based on the potential of this upside. Because I know the institutional money will follow, it’s just waiting for a demonstration that this can be done.”
Another Singapore outfit looking to capitalise on the ICO boom is Trade Finance Market, which last month launched a blockchain-based solution with the aim of stopping the double financing of invoices. The tool allows banks and factors to check if another funder has already paid an invoice by cross-referencing it against a blockchain-based central registry. The company also provides funding to underbanked SMEs.
“Our experience in running the Trade Finance Market platform has shown that speed is of the essence in financing SMEs and is a competitive differentiator. The ability to be able to quickly fund transactions that have passed our diligence filters is the main reason we are doing an initial token sale. Transactions will be further de-risked through the use of security and smart contracts using blockchain technologies. This will also keep costs down and savings are then passed onto our SME clients,” executive director Raj Uttamchandani tells GTR.
The company will be starting with a pre-ICO in October, a period used to screen potential funders to ensure they comply with anti-money laundering (AML) standards. The funds will be raised by issuing the company’s own token, EximCoin.
Uttamchandani says: “Crypto investors are on the lookout for tokens that can provide a return through real world utility – having a social benefit also helps. Through our platform, EximCoin holders will be able to view in real time as trade deals are initiated, financed and completed – providing reassurance to all parties involved that their money is at work with SMEs and that they will see returns within a 120-day period.
“For non-crypto funders who are dissatisfied with their existing investment opportunities, EximCoin tokens also provide access to excellent returns via emerging market trade, always secured with a security or smart contract. Unlike other companies raising funds via an ICO, we have working products as well as an excellent track record in trade finance,” he adds.
He compares the noise around ICOs – not to mention blockchain – to the internet hype 20-odd years ago. There will be a lot of failures, but the cycle has also laid the grounds for companies such as Amazon, Google, Facebook, Alibaba – the cornerstones of the internet as it exists today.
Uttamchandani continues: “In time, crypto-based products and technology in general will evolve in ways we cannot fully realise now – for example the same way running ICQ or AOL/Yahoo messenger on a desktop computer via a dial up connection eventually spawned a video call on WhatsApp running on 4G mobile. The one thing we can say is that this is just the start of the journey for crypto technology and we are very excited to play our part in the process of its evolution.”
In Moscow, meanwhile, ModulTrade CEO Evgeny Kaplin is gearing up for another token sale in October – which is set to be a busy month for the nascent market. He hopes to raise US$15mn to support the creation of a blockchain-based smart contract platform and to launch an SME lending solution in three EU countries.
He tells GTR: “We will use MTRc – the ModulTrade token distributed during the token sale – to provide financing to SMEs to facilitate trade. Thus we will help solve the main problem for SMEs in trade – lack of financing.”
A former trade finance banker with Sberbank, Kaplin says the demand for SME financing is not being met by mainstream channels. This is a common theme among those interviewed for this report. Each has identified a gap in the SME lending market. And each has landed on an ICO as a way of solving this problem.
A minefield of risk
Each of the companies is also aware of the risks involved. They say that regulation of the nascent market is important and welcome the increased scrutiny from regulators. It will, they say, separate the “Mickey Mouse projects” from those that are worthwhile, and if regulation is enforced, give them clear parameters and boundaries to work within.
Understandably, legal experts are looking at the market keenly. Jolyon Ellwood Russell, a trade finance partner at Simmons & Simmons in Hong Kong, tells GTR that he is getting calls about ICOs and alternative fundraising, but has yet to see real movement in the market.
“We are seeing more and more platforms using bitcoin and other cryptocurrency as either a conversion platform in order for the ability to send money or even as a medium to settle payments for goods and services. Therefore, the extent to which such a platform provider can ICO against their particular technology then this might do very well. What might be more exciting is in the world of invoice exchanges. What we might see are players issuing their own coins or cryptocurrency linked to the purchase of invoices sitting on an exchange thereby creating a larger liquidity pool,” he says.
Regarding the risks involved, he is unequivocal: “There are inherent risks on the general unregulated nature of ICO. There is of course the sources of funds and financial crime issues. Bitcoin has not had the cleanest of reputations and given the mammoth appreciation recently, some regulators are monitoring whether ICOs might be an easy means to profit from illegal bitcoin accumulation and diversify into legitimate businesses.”
The other risk is regulatory, Ellwood Russell says. The law looks at substance over form. If the substance falls within an offering to the public and in return shares or an interest in the company is issued, then this is regulated as any stocks and shares market. “Whatever it might be called in techno-speak, if it looks like a duck and sounds like a duck, it usually is.”
There are, of course, ways in which one can mitigate this risk. ICOs are conducted on exchanges, which have varying degrees of scruples. In Hong Kong, Gatecoin has emerged as one of the more reputable, recovering strongly from a hack last year in which it lost US$2mn in cryptocurrency.
Thomas Glucksmann, head of marketing at the exchange, explains that Gatecoin will conduct thorough AML and KYC checks on all token buyers. “There are a lot of dodgy projects,” he tells GTR, but says that there is no reason why legitimate crypto investors can’t be a good fit for trade finance lenders. However, he says it takes careful planning and diligence to pull it off successfully.
Equally, Steve Ehrlich, lead emerging technology analyst for New York corporate advisory Spitzberg Partners, has heard a lot about trade-based ICOs, particularly in the logistics space, but has some advice for those hoping to do it within sound legal parameters.
“The short answer is to hire a good lawyer that has expertise in the relevant jurisdiction. They can help a company understand its regulatory requirements by assessing whether or not what it is issuing is considered to be a security. This determination is crucial because securities come with additional requirements and complications, such as limiting to whom you can market your ICO,” he says.
Every month there seems to be a new study or report citing the gap in financing for small businesses. Trade finance is not suffering a liquidity problem however, it is suffering from a dearth in risk appetite. Banks, chastened by regulations, are increasingly focused on the least risky transactions and it is essential that new sources of funds are harnessed.
Will this come from ICOs? The volumes discussed thus far are miniscule when stood next to the market gap. However, any legitimate source of funding should be encouraged (with “legitimate” being the operative word). The market is developing extremely quickly, with problems and opportunities revealing themselves daily. What’s clear is that this trend will not abate any time soon. Regulators should act quickly to ensure the potential is not lost, while those interested should tread carefully and choose their investors with extreme care.
The post ICOs: the next goldmine for trade finance lenders? appeared first on Global Trade Review (GTR).
Business finance company MarketInvoice has signed an agreement with Varengold Bank AG to provide £45m funding annually on its invoice finance platform. This will fund working capital solutions for businesses across the UK.
20 September – Overall, sums advanced to UK businesses from institutional investors via MarketInvoice have increased more than 4-fold since 2014 from £27.8m to £116.3m in 2017. Cumulative funding from institutions stands at £296.2m which represents a quarter (26%) of the total funds advanced to UK businesses.
MarketInvoice has today reached the landmark milestone of providing £1.5b funding to UK businesses. The first £1b was achieved after 5 years of trading in December 2016 and just 10 months later, the company has reached £1.5b. Supporting 18,700 jobs at the businesses MarketInvoice serves, over 70,000 invoices have been funded to help ease cash flow and become an enabler for growth and expansion.
August 2017 was a record funding month at MarketInvoice since it launched. £74.1m worth of invoices were funded to businesses across the UK, a 109.4% increase on August 2016 (£35.4m).
The recent increase in interest from global institutions and rise in funding levels has come since the launch of MarketInvoice Pro and mirrors the up-take of the product by UK businesses. MarketInvoice Pro is a confidential invoice discounting facility, launched earlier this year, offering businesses a funding line against their outstanding invoices. This product upgrades the MarketInvoice offer from its long-standing invoice-by-invoice product called Select.
Dan Walker, Head of London Office, of Varengold Bank AG commented: “We have been looking at the fintech sector for some time. MarketInvoice and its peer-to-peer invoice finance platform presented a fitting opportunity for us. In particular, we were attracted by their products, approach to risk management and ambition for growth.”
Anil Stocker, CEO and co-founder of MarketInvoice said: “Institutions have played a significant role in our growth story and over the past few years. This commitment from Varengold is further proof of our ability to provide finance to high growth businesses across the country, we’re excited by their support of our mission.”
“We look forward to building on this relationship as we scale into larger funding lines through our new MarketInvoice Pro product. I’m sure we’ll see many more examples of this type of collaboration in the coming months.”
On reaching the £1.5b milestone, Anil Stocker added: “Our whole team is proud to be supporting the back-bone of the British economy – businesses doing great work in media, technology, design, construction, manufacturing, education, and many more. This is a huge milestone for us as a funding platform. We started the company to provide businesses with choice, flexibility and an easy-to-use funding solution. Companies have been able to access funding from £10,000 to £3 million against invoices, to fund their working capital, which is vital to the success of small companies dealing with growing orders and long payment terms. This funding has supported fast growing companies to launch new products, hire more staff, and export to new markets.”
MarketInvoice’s main strategic ambition is to broaden its reach to be able to support a wider range of businesses, from start-ups to larger businesses looking to scale up. The company aims to help even more companies get paid faster by financing their invoices, so business owners can save time and focus on running their business.
19 September – Noted bank robber Willie Sutton explained why he robbed banks. Willie replied, “I rob banks because that’s where the money is.” Once true for supply chain finance as well, as a credit class, that clean, simple view is going through changes.
First, the funding source is starting to change. The funding landscape has started to change post 2008 crisis, but so far the change has been marginal.
The influence from the financial crisis form 2008 is still reverberating. As Tom Dunn, CEO of Orbian indicated in our recent webinar Funding Modern Supply Chains,the QE stimulus post crisis has been staggering.
The funded activity has risen by 400% over those 7 years as SCF continues to grow for global corporates.
But where does the funding come from?
In 2010, it was almost all bank funded (>90%) with the residual being corporates who understood supply chains and invested.
In 2017, the banks still fund over 80%. And according to Dunn, this is a natural product of the banks. But Orbian always had non bank investors in mind when developing their product. As Dunn said, there was a strong focus on a notes based funding system that would allow investors who had access to DTC or Euroclear. While being a bank focused market, 17% coming from non bank investors is triple what it was in 2010 for Orbian derived business. And these new investors include insurance companies, as well as Orbian self funding to warehouse receivables.
Dunn also indicated the investor geography has expanded from a more USA focus to European and Asia as well. Credit exposure against high quality U.S. corporations continue to be the dominate source of assets. Basically, non US banks are hungry for high quality assets.
Second, spreads are being driven down given the QE liquidity flooding the market in the U.S. Since 2011, Europe had the same effect with the ECB bond buying program. Dunn says SCF assets are not specific to QE, but they are second order beneficiaries of this liquidity.
Third, the Federal Reserves new proposed Quantitative Tightening “QT” program or withdrawing of the liquidity they been pumping into the market will put pressure on banks liquidity positions while SCF programs are expecting to grow significantly. The WSJ just posted about this yesterday, The Fed, a Decade After the Crisis, Is About to Embark on the Great Unwinding
Will this lead to rising spreads in SCF assets? Will banks be able to support SCF growth as they shrink their balance sheets?
The article Orbians Experience with Non bank Investors in Supply Chain Finance Structures first appeared on Spend Matters Network.
The Hague, 18 September 2017 – FMO, the Dutch Development Bank, together with Miami based Fintech and digital transformation strategists above & beyond (a&b), today launch “ FinForward”, a marketplace where Fintech companies, Financial Institutions (FIs) and Mobile Money Providers (MMPs) in Africa are matched. After matching, they enter a testing environment where the banks and Fintechs can test and integrate new financial technology solutions in a safe and secure manner.
The objective of the new platform is to accelerate the digitization of the financial industry in Africa by supporting innovation of the core business with digital solutions. The matching and integration tool will make global Fintech companies accessible and top-of-mind to African financial institutions in order to help them to reduce costs, innovate, add services, tap into new revenue streams and work towards open banking platforms. It will also enable them to service difficult to reach segments such as the bottom of the pyramid, women and small entrepreneurs. FMO‘s Andrew Shaw, Senior Fintech Specialist, “We feel that the Fintech conversation is less about who is the disruptor and who is the incumbent, and more about the ecosystem and new partnerships and alliances. We want to stimulate collaboration where it makes commercial sense, and where we can improve financial inclusion.”
“FinForward is one of a kind initiative that facilitates collaboration between Financial Institutions, Mobile Money Providers and Fintech companies. We are building a thriving interconnected global ecosystem integrated through one single platform”, added Jorge Ruiz, Co-Founder & CEO, above & beyond tech.
Fintech as a game changer for emerging markets – reaching the unbanked
African financial institutions recognize Fintech as a game changer that allows them to increase efficiency and expand their client/product base. However, they admit that they have difficulties finding, choosing, testing and implementing Fintech companies and their solutions.
The high demand for financial services in emerging markets provides a large market opportunity for innovative Fintechs using new financial technology such as block chain, data analytics, artificial intelligence and new distribution systems such as online, mobile and agent networks.
Fintechs for emerging markets are active in areas such as balance sheet lending, platform lending, payment solutions, software-as-a-service (SaaS), digital field applications, alternative credit scoring, predictive data analytics and transaction verification via block chain.
FinForward, a 9-month program
The 9-month program aims to link Fintechs worldwide with financial institutions in Africa. How does it work?
– Outreach – Banks, Mobile Money Providers and Fintechs are invited to join
– Fintech Opportunity Scan – Participating banks and mobile money providers define their problems and needs
– Matching – Pairing of Fintechs based on problem definition
– Acceleration & Integration – Testing of Fintech solutions in a sandbox and integrating the technology into the bank’s operations
– Showcase – demonstrate success during showcase days
FMO is the Dutch development bank. As a leading impact investor, FMO supports sustainable private sector growth in developing countries and emerging markets by investing in ambitious projects and entrepreneurs. FMO believes that a strong private sector leads to economic and social development, and has a more than 45-year proven track record of empowering people to employ their skills and improve their quality of life. FMO focuses on three sectors that have high development impact: financial institutions, energy, and agribusiness, food & water. With a committed portfolio of EUR 9.0 billion spanning over 92 countries, FMO is one of the larger bilateral private sector developments banks globally. For more information, please visit www.fmo.nl.
(6 September 2017 – Global) Publisher, Global Trade Review (GTR) has launched an investment arm that it says aims to support trade-associated fintech companies.
GTR Ventures (GTRV) will be unveiled at the company’s Asia Trade & Treasury Week in Singapore this week.
GTR says the venture company will invest private capital into trade and SME lending platforms, particularly in emerging markets.
In a statement published on the website, GTR added that the venture “will offer stakeholders – such as entrepreneurs, investors, private companies, banks, and governments – the chance to test fintech innovations for trade activities.” Additionally, it will act as a platform to channel more private capital into trade finance.
The new firm will focus on four area of investment, comprising of trade finance, trade credit insurance, SME finance and supply chain, physical trade.
The venture firm will be led by Rupert Sayer (co-founder and CEO) and Kelvin Tan (co-founder and chief investment officer), both based out of Singapore in addition to Peter Gubbins (co-founder and managing director) out of London.
The firm said it will also have a close advisory board comprising prominent global trade, insurance, and investment executives. GTRV will also be supported by a technology panel and a series of investment committees pertaining to each identified trade finance sub-sector.
The article Trade finance publication to launch venture capital arm first appeared on East & Partners.
The International Chamber of Commerce (ICC) Banking Commission’s new head of policy, Olivier Paul, discusses how the Banking Commission’s role will be critical as the trade finance industry adapts to unprecedented change.
There are some fundamental challenges ahead for trade finance: involving the regulatory landscape, the technological evolution of our industry and the vital inclusion of new non-bank sources of liquidity. These changes will involve everyone, meaning we will all need to adapt, including the ICC Banking Commission, where I recently became head of policy.
Yet I remain optimistic. For trade finance as a discipline, I am convinced that its best years are ahead of it, as long as we can embrace the future and view change as part of an evolutionary process rather than an existential threat. In fact, I see the Banking Commission’s role as vital for preparing the industry for that future, as well as being an advocate and influencer of the changes underway.
Just 20 years ago the most important role for the Banking Commission was rule-making, with advocacy a second, though still important, function. Since the 2008 financial crisis, however, these roles have been reversed, with advocacy of trade finance now the Banking Commission’s most critical function.
Why? Because both the regulatory and the market response to the crisis have inadvertently presented trade finance with constraints that are impeding our industry. One unintended consequence of this has been a marked widening of the trade finance gap (between the supply and demand for trade finance), which has grown to reach a deeply-concerning US$1.6tn (according to the Asian Development Bank). This means US$1.6tn of potential trade has been impeded or lost due to a lack of available financing – a sobering number and an issue the Banking Commission is determined to address.
Hence our focus on advocacy: a role that defends trade finance as a discipline while also encouraging workable changes to the trade finance environment. Our goal is to promote the truth about trade finance, while also promoting a more level playing field for trade finance providers globally.
The elevated role of advocacy is not to denigrate our rule-making role, however – not least because it’s here where we can help trade finance absorb change. For instance, one of the most important market-changing trends is the current digital revolution. Far from being a threat, digitalisation can greatly benefit trade financers with respect to efficiency, costs and transparency – as well as in encouraging new entrants.
Now, and in the future, the Banking Commission expects to play an important role in helping to integrate digital trade finance tools, as well as the non-bank providers of these tools, into the trade environment. Recently, we launched a Working Group to accommodate trade finance digitalisation – aimed at enabling connectivity and collaboration between stakeholders to ensure a wider adoption.
A key trigger for the Banking Commission’s current work remains, however, the US$1.6tn trade finance gap – a deficit highlighting what I see as the biggest challenge faced by the industry in a generation: that we cannot generate enough supply to meet the current demand for trade finance – a fact confirmed by 61% of bank respondents in our 2017 Global Survey of Trade Finance.
While the trends underpinning the gap are multifarious and complex, it is impossible to escape the conclusion that one of the key reasons for the deficit is the hardening regulatory environment for trade. Regulators – in an understandable response to the global financial crisis – have significantly increased the cost of trade transactions for banks. A key objective of the Banking Commission is, therefore, to raise awareness of trade finance – and its true characteristics – in order to advocate a more workable regulatory environment for the discipline.
Here, we have had some success – aided by our work with the Trade Register to empirically measure what we all knew from experience to be intuitively true: that trade finance is a low-risk asset class despite involving emerging market destinations and obligors.
Yet such advocacy is a long way from our sole purpose – important though that is. For us, it is clear that – to be bridged – the trade finance gap requires new sources of funding especially from non-bank providers of liquidity.
So we need to welcome these new funders into the industry – and, indeed, encourage non-banks to play a greater role in the future of trade finance. While the majority of financing is still undertaken by banks – both globally and locally – new actors can potentially transform the trade finance landscape. This applies to challenger banks and fintechs, in addition to new sources of liquidity such as insurers and pension funds, as well as specialist funds that have noticed the low-risk attributes of this emerging asset class.
Although this is a welcome change, the Banking Commission aims to integrate these new actors in a way that is not detrimental to the rules-based trade finance we both advocate and officiate.
Smoothly integrating new technological developments is another potentially beneficial move. For decades, letters of credit, and other trade financing tools have remained largely paper-based and unchanged. And, despite the growth of open account, continue to play a signicant role – accounting for around 10% (or US$1.5tn) of global trade flows. Yet with the digital revolution in trade finance well underway, the way banks manage and monitor the digitalisation of these tools will be critical.
Accommodating market constraints and risk
With both new players and digitalisation, collaboration between parties is key. Fortunately, the post-crisis atmosphere has encouraged collaboration. This is true of both international organisations such as the ICC (working with other multilateral organisations and even obtaining observer status at the United Nations). But it is also true between banks, and especially between banks and new players such as pension funds and fintechs.
All have their part to play, and the Banking Commission can help facilitate collaboration through both rule-making and data sharing. Of course, the Trade Register is one such area of cross-bank collaboration – one that has a highly beneficial impact by showing both internal and external supervisors the low-risk nature of trade finance.
The Register was originally-focused on aiding constructive dialogue with regulators that could, hopefully, result in trade finance winning better treatment with respect to regulatory constraints, ratios and the levels of regulatory capital required. Yet banks have increasingly used the Register for risk modelling and to report results and findings to their respective regulators and internal supervisors – showing the potential for the Register to become a Basel-compliant assessment tool, as well as demonstrating the benefits of data pooling.
Our Global Survey is another collaborative exemplar. With responses from 255 participating banks located in 98 countries (as well as contributions from various leaders in their field), it is the largest of its kind for the trade finance industry. The Survey eloquently expresses the evolution of market constraints, especially since the crisis – helping banks and corporates develop their own tools and strategies, as well as gain further insight into their own budgets and capacities.
Advocating a level playing field
But reducing the trade finance gap is also about developing standards that help banks raise the level of their lending capacity, as well as allowing new players to add their liquidity on a sustainable basis – ie by adopting universal rules and by generating a universally-accepted rules-based approach to trade finance. So the Banking Commission as a rule-making body remains highly relevant.
A key part of this is reducing the risks of protectionism, which is why we are now working with the World Trade Organisation (WTO) to establish new trade recommendations for all nations. We believe that, if we are able to establish a level playing field for trade, we will reduce the number of people crying “foul” (sometimes with strong justification), which will allow protectionist voices to be effectively countered by those advocating global trade.
Certainly, trading by the same rules, standards and regulations – a key ICC mission – will ease the trade finance process, which should help close the trade finance gap. And it just might help silence those protectionist voices too.
Of course, protectionism is not directly related to financial constraints – so it cannot necessarily be blamed for the trade finance gap. In this regard, we believe that the further inclusion of small and medium-sized enterprises (SMEs) into mainstream trade financing is vital for encouraging trade growth and for closing the gap. Approximately 60% of businesses have their bank lending applications rejected – the vast majority of these being SMEs.
The need for SME inclusion in trade finance is particularly acute in Africa, where a large number of potential SME exporters cannot find financing. Yet this also impacts OECD exporters. Our 2016 Global Survey revealed that 66% of business found “access to finance a significant obstacle to trade in Africa”.
Again, this is a matter of increasing capacity while creating a level playing field. And a significant portion of our efforts have this motivation in mind.
Digitalising trade finance
Perhaps the greatest disruption for trade finance will come via digitalisation, however. Here, I see a key role for the Banking Commission in facilitating this change – particularly with respect to the exchange of data and documents and in enabling industry players to seamlessly and instantly connect.
As of now, we are in the process of reviewing all existing ICC rules, then conducting technical and legal discussions on how to adapt them to digital innovation. And at a later stage we will create standards to on-board third-party providers. The aim here is to attract non-bank providers – including fintechs – to apply the standards we develop so that there is harmonisation across the industry, which will aid efficiency and liquidity.
Far from a protectionist move, standardisation should allow new players the bandwidth to be innovative – while bringing the benefits of transparency, compliance and reduced operational risk to all. Of course, this is a key focus area for the digitalisation Working Group, with the goal of extending inclusivity and, yes, bridging that trade finance gap.
Certainly, we must encourage the industry to restructure in ways that successfully absorb the significant technological changes underway. The Banking Commission has a major role to play in this respect – ensuring that the rules of today, which are shared among 90% of the banking industry, stay relevant.
Overall, we view digitalisation as potentially of great benefit to the trade finance industry – for both existing and new players. Yet that does rely on the rules-based approach remaining intact. Given this, the Banking Commission is determined to play a significant role in developing workable standards that support this brighter future. And that even includes developing standards for blockchain.
Bringing the trade finance community together
Core to the Banking Commission’s philosophy is how it goes about facilitating change. Our activities are based on the existence and development of different initiatives: executed through working groups, work streams, workshops and more. These are formalised, monitored, discussed and renewed twice yearly at our Annual Meeting and Technical Meeting. Such formality aids both transparency and inclusivity and is – for us – the bedrock for managing sustainable change.
And that brings us to a final significant role for the Banking Commission – in bringing the trade finance community together: to take changes into account; to assess them with respect to their potential impact on the industry; and to develop sustainable responses that advance rather than hinder the industry’s progress.
Both of the Banking Commission’s major membership forums involve discussions on the market, the global situation, big trends and our global strategy. For instance, the main topic discussed during the last Technical Meeting was advocacy – in other words, the actions required by the Banking Commission to help accommodate new regulations such as Basel III and IV.
A lot of our time is dedicated to managing dialogue on such topics, which are first generated by the Advisory Board and the Executive Committee. The meetings provide opportunities to update the membership and the wider trade finance community of the work underway – bringing the entire community together to discuss the issues and influence the agenda.
Certainly, open conversation and facilitation between our members and the wider industry remains a critical pillar of the Banking Commission’s role, not least because this ensures the trade finance industry remains fit for purpose. In this, I think we do a rather good job – although we are always open to evolution and improvement.
The post A view from the ICC: Changing times call for a collaborative approach appeared first on Global Trade Review (GTR).
5 Sept – International Finance Corporation (IFC), a member of the World Bank Group on Tuesday has invested USD 10 million as equity in Power2SME, an e-commerce platform that helps small and medium companies to buy raw materials at bulk prices and get working capital without collateral.
In addition to the investment, IFC will also advise Power2SME to help expand beyond its current 14 states, improve its ability to provide working capital to SMEs by adding more banks as partners, and increase the number of users on its platforms by up to 10 times in five years.
Power2SME is backed by venture capital firms such as Kalaari Capital, Accel Partners, and Inventus Capital. Started in 2011, the company has raised about USD 33 million so far, excluding this round. The company also counts former UIDAI Chairman Nandan Nilekani as its angel investor.
“IFC’s extensive experience in supporting the SME sector through financing and deep networks with banks and financial institutions will help us in our vision to make SMEs bankable,” said R Narayan, founder and CEO, Power2SME.
He added that Indian SMEs are critical to making India a manufacturing hub and we must foster the sector if we are to meet the national imperative of inclusive growth.
“We have aggressive plans to boost our revenues and continue on our path of profitability,” he added.
Micro, small and medium enterprises form a large part of the Indian economy, accounting for 45 percent of the country’s industrial output and 40 percent of its exports.
There are 48.8 million MSMEs in India, which employ 111 million people.
There is a critical shortage of long-term funding for the sector. Some estimates put the gap at USD 320 billion against a total of demand of USD 500 billion. India has the largest base of SMEs in the world after China, contributing only 8 to 9 percent to the GDP, compared to 60 percent in China.
“Our investment in Power2SME will spur greater VC interest in the SME sector in the country and support India’s vision to become a global manufacturing hub,” said Ruchira Shukla, Venture Capital and Private Equity Lead, IFC South Asia.
She added that by working with SME-focused companies and partner financial institutions, we aim to improve access to finance for over one million SMEs in the next five years.
Following the recent slowing of start-up funding in India, IFC has made a strategic decision to increase its venture capital investing.
The company makes direct equity investments in start-ups and as a limited partner in venture capital funds.
The article Power2SME raises USD 10 mn from International Finance Corporation (IFC) was taken from MoneyControl News.
SINGAPORE (5 September 2017) — Businesses of all sizes continue to struggle to access sufficient credit, resulting in a global trade finance gap of $1.5 trillion in 2016, according to an Asian Development Bank (ADB) Brief released today. Developing Asia’s share of the trade finance gap was 40% of the global total.
In its fifth annual study, 2017 Trade Finance Gaps, Growth, and Jobs Survey, ADB quantifies market gaps for trade finance and explores their impact on growth and jobs through a survey of over 515 banks and 1,336 firms from 103 countries. While the global trade finance gap stabilized in 2016 compared to the 2015 record high of $1.6 trillion, it still translated to missed growth opportunities and job creation.
“A sizeable trade finance gap is a drag on trade, growth, and job creation,” said Steven Beck, Head of Trade Finance at ADB. “We hope the results of the survey will encourage private and public sectors to ramp up collaborative efforts to improve businesses’ access to trade finance. Our Trade Finance Program (TFP) is here to assist and address these market gaps.”
Micro, small, and medium-sized enterprises (MSMEs) have the biggest difficulties in accessing trade finance, representing 74% of total rejections last year, compared to just 57% in 2015. This high rejection rate means foregone trade, which is a drag on overall economic growth. The ADB study suggests that a 10% increase in trade finance globally could boost employment by 1%.
Findings in the study revealed that one of the biggest reasons financial institutions are reluctant to provide trade finance to small businesses is rooted in the cost and complexity of anti-financial crimes due diligence and the perception of low returns on financial support from smaller firms (reported by 29% of banks).
Survey respondents believe that fintech and digitization can be a solution to a lack of MSME finance, although awareness and usage of this technology has to be improved. And while fintech is reducing the cost of delivering finance to companies, there is no evidence it is reducing market gaps. “More than reducing cost, fintech needs to deliver an enhanced capability for financial institutions to conduct due diligence on MSMEs before it can play a role in reducing gaps,” said Mr. Beck.
TFP, backed by ADB’s AAA credit rating, provides guarantees and loans to over 200 partner banks to support trade, enabling more companies throughout Asia to engage in import and export activities. With dedicated trade finance specialists and a 24-hour response time, the program has established itself as a key partner in the international trade community.
TFP complements its financial support with a regular series of workshops and seminars to increase knowledge and expertise in trade finance products and operations, risk management, and fraud prevention.
Since 2009, TFP has supported more than 10,900 small and medium-sized businesses across developing Asia — through over 16,300 transactions valued at over $28.6 billion — in sectors ranging from commodities and capital goods, to medical supplies and consumer goods. ADB launched a Supply Chain Finance Program to complement its successful trade finance operations.
For more information, visit the TFP website: http://www.adb.org/tfp
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2016, ADB assistance totaled $31.7 billion, including $14 billion in cofinancing.
The article $1.5 Trillion Trade Finance Gap Persists Despite Fintech Breakthroughs first appeared on Asian Development Bank.
The Wholesale Trade Industry Transformation Map (ITM) was unveiled today by Mr. S. Iswaran, Minister for Trade and Industry (Industry) at International Enterprise (IE) Singapore’s event, “Digitalisation of Trade – New Mindsets, New Skillsets”. The ITM will help companies digitalise to enhance global growth and productivity, and targets to create 10,000 new jobs by 2020. Comprising over 34,000 firms, the wholesale trade industry provides livelihoods for more than 325,000, accounting for 9% of Singapore’s workforce in 2016.
In 2016, wholesale trade contributed S$47.3 billion (12%) to the nation’s gross domestic product (GDP). The industry continues to grow strongly as Asia’s rising population, urbanisation and consumerism drive trade flows to meet the region’s increased demand for food, infrastructure materials, fuel and electronics, and more.
However, wholesale trade is highly susceptible to global trends such as rising protectionism as it is an externally-oriented sector. Technological advancements are also transforming the global marketplace, business models and job functions.
The Wholesale Trade ITM has been developed in collaboration with a wide range of key stakeholders, covering industry players, trade unions, trade associations and government agencies. The key strategies are described below.
Building trade connectivity through digital marketplaces and platforms
Digital business-to-business (B2B) e-Commerce transactions are expected to reach US$6.7 trillion by 2020. The ITM includes plans to accelerate global trade connectivity, facilitating and capturing value from e-commerce trade flows, as well as increasing SMEs’ market access and productivity through digital marketplaces and platforms.
Key initiatives in this area include the ASEAN Digital Trade Facilitation Platformand a Cross Border Cognitive Supply Chain Solution. The former, led by Singapore Logistics Association (SLA) and in partnership with GeTS Global (Global e-Trade Services) expected to be ready in Q4 2017. It will foster collaboration among ASEAN logistics associations and facilitates customs clearance through a single window and allow easier and more efficient movement of goods across regional borders.
The collaboration agreement for the Cross Border Cognitive Supply Chain Solution was signed at the ITM launch event today. It is a digital trade platform by GeTS Global and IBM Asia Pacific and enables 350,000 connected trading partners on IBM’s Supply Chain Business Network (SCBN) to do automated customs declaration at 18 customs nodes across the world, including Singapore, China, Indonesia, Thailand and the US. It is equipped with cognitive capabilities and predictive analytics to help traders mitigate disruptions, risks and costs. For instance, in bad weather conditions, it will recommend an alternative source for the obtaining of goods and alternative routes for shipment to ensure timely delivery.
The last initiative in the digital platforms area is to work with trade associations and private enterprises to help SMEs list on digital marketplaces, enabling them to access new markets and enjoy economies of scale through shared services.
Strengthening enterprise capabilities and growing a vibrant ecosystem of wholesale trading enterprises in Singapore
A new government agency, named Enterprise Singapore, will be formed through the merger of IE Singapore and SPRING. Leveraging IE Singapore’s core strengths in internationalisation and SPRING’s expertise and levers in helping SMEs, the newly-formed agency will offer companies a holistic and integrated network to build capabilities and access overseas markets opportunities. Going forward, Enterprise Singapore will be the lead agency driving the transformation of the wholesale trade industry.
Developing industry-ready talent equipped with deep skills for digitalisation and internationalisation.
The ITM foresees a demand for specialised talent with digital skillsets such as digital marketing, global supply chain and data analytics will grow as companies address new business models. The range of roles with greater demand include Digital Marketers, Data Analysts, Regional Business Development Managers, Risk & Compliance Officers and Supply Chain Specialists.
There are ongoing partnerships with Workforce Singapore (WSG), National Trade Union Congress, Institutes of Higher Learning and industry players to identify job opportunities and prepare PMETs (Professionals, Managers, Executives and Technicians) and students for careers in wholesale trade. The Wholesale Trade ITM skills framework, to be completed by the second-half of 2018, will provide industry-validated insights into the skillsets required for the future of trade.
IE Singapore and the Singapore University of Social Sciences (SUSS) signed a Memorandum of Understanding (MOU) today to develop a Certificate/Minor Programme in International Trade, covering areas such as digitalisation, analytics and regional cultural intelligence.
IE Singapore, WSG and the Singapore Business Federation (SBF) signed another MOU at the ITM launch to develop a Professional Conversion Programme (PCP) to nurture a pipeline of talent with regional market knowledge.
IE Singapore, WSG, the Singapore Management University (SMU) and International Chamber of Commerce (ICC) Academy launched a PCP for International Trading Executives in 2016. SMU is working towards a target of 100 PMET placements per year and will incorporate more digitalisation relevant modules for future runs.
IE Singapore and Ngee Ann Polytechnic signed an MOU at the ITM launch to jointly develop a Diploma programme in International Trade & Business. The first wholesale trade-related diploma programme in Singapore, it will incorporate modules on digital business solutions and analytics. The first intake, estimated to enrol 120 students, will begin in April 2018.
 Roadmaps are being developed for 23 industries to address issues within each industry and deepen partnerships between Government, firms, industries, trade associations and chambers. The ITMs are grouped into 6 broad cluster: Manufacturing, Built environment, Trade & connectivity, Essential Domestic Services, Modern services and Lifestyle.
The article IE Singapore’s Industry Transformation Map for Wholesale Trade focuses on digital platforms and skill development first appeared on opengov.
At the biggest trade finance industry event in the world, excitement about the impact of blockchain was palpable, but it also came peppered with a welcome dose of realism.
Blockchain will not be a serious play for trade finance until the underlying trade has been digitised, was the message from a procession of experts at the GTR Asia Trade & Treasury Week in Singapore this week.
“If you’re not on digital trade, it will be difficult to jump straight to blockchain,” said Huny Garg, head of trade and supply chain at Swift.
It was a sentiment shared by Thomas Olsen, who heads the strategy and corporate finance team at the Singapore office of consultancy group Bain & Co. “Distributed ledger technology [DLT] is not the primary solution. It sits on the fundamental problem of trade digitisation,” he told delegates.
Seamus Donaghue, director at Lykke Corporation, a Swiss fintech company, added that you need to digitise the process, before you start looking at the financing angle.
The past year has seen countless proof of concepts in the area of blockchain for trade finance, with banks testing the technology’s suitability amid hopes that it can make transactions more efficient and secure.
With this has come incredible hype. Many have pointed to the Gartner Hype Cycle for Emerging Technologies, which shows the phases fintech innovations pass through before mainstream adoption. Some have suggested we’ve moved beyond the “peak of inflated expectations”, but this seems like wishful thinking: GTR’s inboxes are overflowing with press releases and offers of thought leadership on a development that has yet to even be commercialised.
Many industry veterans are wondering whether the hype is warranted, with others comparing blockchain fever to the echo chamber that surrounded the bank payments obligation (BPO) a few years ago. That initiative, also aimed at digitising trade finance, seems like a distant memory, as banks flock towards its shiny successor. It died a death after failing to gain traction with corporations. Those pushing blockchain must be careful not to fall into the same trap.
The scepticism is warranted and the point over the underlying trade seems well-placed: what is the point in having a digital financial solution to a process that is still labour and paper-intensive?
The trade and logistics industries are making their own move towards digitisation and blockchain adoption, meanwhile, and the likelihood is that these will have to be progressed more before banking follows.
Bernard Wee, executive director for financial markets development, fintech and innovation at the Monetary Authority of Singapore (MAS) spoke of the city state’s efforts to digitise the trade cycle, which involve players from across the physical and financial supply chain.
“We want to connect business and government to lead trade finance out of the stone age,” he said, pointing to the fact that the letter of credit has scarcely changed in decades, and that this is how 40% of Singapore’s trade business is done. The various pilots have shown that the technology works, he said, and all elements of the trade cycle need to work together to advance it.
“We need to co-operate with those we would never have done before,” Wee said.
Banks, meanwhile, reiterated the need for further progress on the digital agenda, be it through blockchain or other methods.
Natalie Blyth, the global head of global trade and receivables finance at HSBC, meanwhile, told the audience that banks have a responsibility in times of great uncertainty to make trade easier, in order to bring “peace, prosperity and optimism to society”. Fintech and trade digitisation, she said are ways of doing this.
“The world has become a more uncertain place. There are things we can control and things we can’t control,” she said, adding: “Asia is leading from the front on free and fair trade. Last year [at the event] I said digitisation would change the industry. Now, the industry is close to live transactions on DLT.”
Kai Fehr, the head of trade for Asia Pacific at Wells Fargo, meanwhile, pointed out that trade finance lags behind most other areas of banking – and indeed of society – and urged the industry to move swiftly into the digital age.
Singapore, September 5th, 2017 – The world’s leading trade finance-focused media and events firm Global Trade Review (GTR) has launched its investment arm, GTR Ventures (GTRV), during its annual GTR Asia Trade & Treasury Week in Singapore ─ the world’s largest gathering of global trade finance decision makers.
GTR Ventures is the world’s first investment firm solely supporting and innovating alongside banks, insurers, corporates, and tradetechs specifically for trade and trade finance. The firm’s mandate includes mobilising greater private capital into trade and small-and-medium enterprise (SME) lending, particularly in emerging markets.
GTRV will offer multiple stakeholders ranging from tradetech entrepreneurs, investors, private companies, banks and governments the unique opportunity to collaboratively test and benefit from integrating cutting-edge financial technology into trade activities. GTRV will not only stimulate public interest in an evolving asset class, it will also serve as a platform to bring together the required expertise to channel more private capital into trade finance.
GTRV will focus on four main investment areas:
Once validated by GTRV’s committees comprising domain specific specialists, tradetechs in these four main investment areas coming through the GTRV platform will have unrivalled access to the markets and target clients that they are looking to connect with and expand. They will engage with the world’s most powerful trade finance community and with accredited investors looking for access to promising and solid trade-related assets. Tradetechs benefit from increased profiling, marketing, advice and support, through GTR’s proven and trusted networks.
GTRV will be managed by Rupert Sayer (co-founder and chief executive officer), Kelvin Tan (co-founder and chief investment officer), both in Singapore, and Peter Gubbins (co-founder and executive director) in London. In addition, GTRV will enjoy the guidance of a close advisory board comprising highly prominent global trade, insurance and investment leaders who know and understand trade and trade finance. GTRV will also be supported by a technology panel and a series of investment committees pertaining to each identified trade finance sub-sector.
Tan was until recently deputy director, trade finance & capital markets development at the Monetary Authority of Singapore (MAS) and before that senior investment officer at the World Bank’s International Finance Corporation (IFC). He also was deputy director, emerging markets at Singapore’s Ministry of Trade and Industry.
Sayer has an editorial and political research background, having been an editor at Euromoney Institutional Investor and Ark Publishing before co-founding GTR. Gubbins headed sales and marketing at various Euromoney and Ark titles.
Rupert Sayer, co-founder and chief executive officer of GTR Ventures says: “We spent 15 years building the GTR media brand into a trusted source of knowledge, networks and trends for the global trade community. There is arguably no trade banker out there who has not read GTR or who has not attended our many conferences, be it in Singapore, Shanghai, Dubai, London, Mumbai, Jakarta, Cape Town, Mexico, or Chicago. Our vision for GTRV is to leverage this powerful community and accelerate innovation in the global trade and trade finance sectors. Starting out from our bases in London and Singapore, both fintech capitals of the world, GTRV will be a pivot point in the world of investments into trade.”
Kelvin Tan, co-founder and chief investment officer of GTR Ventures, says: “Global trade is an annual, evergreen US$16 trillion sector. Regardless of economic cycles, global trade is here to stay. Yet its merits as an alternative investible asset class is not so widely known. With the huge global GTR community, we are here to change this, and champion trade finance as an asset class. Our initiatives to champion trade finance will enable both private and institutional investors to diversify their portfolios into a stable financial product with relatively low default rates. While the returns from trade have traditionally come from providers of debt capital, the emergence of fintechs for trade – tradetechs – should equally begin attracting private equity into this sector.”
Peter Gubbins, co-founder and executive director of GTR Ventures, says: “GTRV can nurture and accelerate entrepreneurial tradetechs which require considerable capital or experienced mentorship to bring exciting innovations to fruition in the market. With our bases in Singapore and London, two leading financial centres, GTRV will make a significant impact on the global trade ecosystem.”
Global Trade Review (GTR), established in 2002 by Rupert Sayer and Peter Gubbins, is the world’s leading news source, publisher and event organiser for the global trade, commodity, export and supply chain finance industries. With offices in Singapore, London and Hong Kong, GTR provides benchmark coverage and in-depth information into the latest developments in emerging markets trade finance. GTR events are the trade finance industry’s biggest and most respected around the world, with the leading industry players, governments, multilaterals and NGOs as supporters and sponsors. Events number over 20 in six continents. GTR is part of Exporta Publishing & Events.