- Focus Areas
Sameer Sehgal, until recently Citi’s head of trade for Europe, Middle East and Africa, has left the bank to become the CEO of Traydstream, a new fintech company that aims to digitise and automate trade finance.
Sehgal brings over 22 years of experience in trade, having held a range of senior roles at Citi and Bank of America. Most recently he headed Citi’s trade, export agency and commodities business in Emea, a position he has held since 2009. During his time there, he helped the bank build new capabilities, including the expansion into supply chain finance, export and agency finance, shipping and commodities finance.
Based in London, Traydstream is a new fintech player in the trade finance space. It has recently launched a solution that digitalises trade documents and automates regulatory compliance screening using artificial intelligence (AI) and optical character recognition (OCR) technology.
Sehgal will lead Traydstream through a crucial period for the company, which has pilots scheduled over Q2/3. It has already started its first pilot with a bank in Asia, and will soon start testing with a European corporate. The company says it is also in advanced discussions with three other banks in Europe and one in Africa.
Traydstream co-founder and COO, Uzair Bawany, says the appointment of Sehgal is “invaluable to us in charting a course for the exciting future for our business”.
The firm’s other co-founder and global sales head, Achille D’Antoni, adds: “Sameer is a true industry expert. Uzair and I are delighted that he has joined us and he genuinely shares in our vision to re-shape trade finance. We are very excited with the next phase in our business as we move to pilot phase with leading banks and I cannot think of a better person to have at our helm.”
Commenting on his move from Citi to Traydstream, Sehgal says: “Digitisation and automation in trade is long overdue and Traydstream’s solution is refreshingly creative. The technical tools at hand today promise to redefine international trade and commerce. It’s a fascinating time to be in the industry and working on these game-changing innovations.”
The hire of Sehgal follows those of three senior staff members to lead the firm’s technology, product development and agent relations teams.
Traydstream’s solution consists of three key modules: an OCR engine, which uses AI to read, scan and instantly structure and store paper-based information digitally; a rule-checking function; and a compliance engine that utilises machine learning algorithms to verify and scrutinise for compliance with international trading rules and regulations.
A new blockchain-based solution has been launched 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.
Trade finance is rife with cases of document duplication and the industry is currently exploring ways in which blockchain can be used to prevent these cases of fraud. Earlier this year, warehousing company Access World experienced a number of cases of warehouse receipt duplication, while the costs of the Qingdao fraud, which also involved multiple warehouse receipts, are still being counted.
Invoice Check from Trade Finance Market (TFM), a Singapore-based fintech company, is one of the early products to launch with this aim in mind. It has been developed over the past year on the Ethereum platform and uses smart contracts.
“Our system is in public beta and provides a manual method of entering invoices and having them checked against a blockchain-hosted database. A bank or factoring company simply enters basic invoice parameters to perform an initial check in less than 30 seconds. This data is stored on the blockchain and funders are alerted if there is a potential risk of double financing,” Raj Uttamchandani, the company’s executive director, tells GTR.
He adds: “We have received an enthusiastic response from factoring organisations and governments to ensure wide adoption and usage of the tool – especially in markets where there is no central registry on which to register a charge or enforcement takes a long time. We have also received a high level of interest in markets where peer-to-peer platform usage has grown, as Invoice Check can help with de-risking spot factoring and single invoice transactions. Making the basic version of the tool free is also key in lowering friction to usage.”
The company is working with trade finance organisations globally, he says, to garner invoice data, which is currently entered manually by banks and factors. The next step is to automate the process and to on-board more financial institutions, so that the registry is comprehensive. “By providing this data, the industry as a whole benefits – which is why we made it a public good and free to use,” Uttamchandani says.
The initial pain point TFM is trying to address is SME financing – or lack thereof. The company already has a trade finance lending platform, and has found that the inability to validate invoices provides an obstacle for SMEs in getting finance.
It has also built a tool called Collateral Check, which provides a registry for warehouse receipts, which will be available in beta launch later in August. Combined, this suite of tools has the potential to improve risk management processes – but it all depends on buy-in, in order to build a comprehensive database.
The theory behind blockchain preventing fraud in trade finance stems from its immutability. Once information is lodged on the blockchain, it cannot be distorted or duplicated. It is stored, digitally in – as blockchain evangelists like to tell us – “a single instance of the truth”.
Uttamchandani says the company is still assessing how useful it is at eradicating fraud, looking at it from two angles.
“The blockchain is just like any other database, so the data on the blockchain is only as good as its source. If fraudulent data goes in then the blockchain cannot solve that problem. We can run artificial intelligence algorithms on the blockchain data to stop fraud but blockchain itself cannot eradicate it,” he explains.
The second one is around the adoption of common standards. “Right now, with many legacy systems and competing private blockchain initiatives, this may take a long time to achieve – especially if one considers a consortium of financial entities who will all have to work together with governments, logistics providers, tech companies, ports, etc. Just look at the bank payment obligation (BPO), even though it was promoted by Swift, adoption has been slow,” he says.
This has prompted TFM to look towards “specific niche areas where we can solve small real-world problems”. The company is trying to use blockchain to fix a known problem, in other words, rather than be the solution to all the issues with trade finance.
There have already been a number of other tools launched in this space. LMEshield from the London Metals Exchange is a central electronic register “providing global off-warrant commodity receipting”. Again, it helps to alleviate problems around document duplication (off the blockchain) but relies on all parties involved being registered on the solution.
Meanwhile, in 2015, DBS and Standard Chartered became the first banks to develop a trade finance application on blockchain, when a proof of concept (PoC) was launched that tracked invoices, backing loans to suppliers, reducing risk of invoice duplication, while retaining client confidentiality.
At the time of the launch, Gautain Jain, global head of digitisation and client access for transaction banking at Standard Chartered, told GTR: “We believe we can substantially reduce the risk of duplicating invoice financing using the distributed ledger and soon we will start looking at other trade instruments like the bill of lading. In time, we believe that the assembly of all the various documentation and processing stages involved in a trade transaction can happen on a distributed ledger.”
Since then, countless PoCs have been launched, but the industry is still awaiting a fully-commercialised and widely-used blockchain solution. As yet, you can count the number of live transactions involving multiple banks on blockchain on one hand.
The post Blockchain solution aims to stop trade invoice fraud appeared first on Global Trade Review (GTR).
Access World Logistics L.L.C., a joint-venture between U.A.E. based Rais Hassan Saadi (RHS) Group and Switzerland-headquartered Access World Group (Access World) organized a ground-breaking ceremony at the site of their upcoming 3rd party logistics facility at Jebel Ali Free Zone.
The event was graced by Mr. Mohammed Al Muallem, Senior Vice President & Managing Director – DP World UAE Region and CEO – JAFZA, Mr. Asim Al Abbasi, CFO – JAFZA, Mr. Abdulla Bin Damithan, Director Commercial – DP World UAE Region, Ms. Madiha Salem, Director EHS – Trakhees, other officials from various authorities, key clients, service providers and leaders from the shipping & logistics fraternity.
Mr. Saleem Al Rais, Director – RHS Group, Mr. Peter M. Waszkis – CEO Access World, Mr. Peter Barnhoorn, Director – Access World Logistics L.L.C. and other distinguished members from the RHS Group as well as Access World were also present at the event.
During the welcome address, Mr. Waszkis said, “our vision is to deliver value to all our stakeholders by providing comprehensive logistics solutions in a competitive, safe and friendly environment”.
The multi-product warehousing facility scheduled to be commissioned during 2nd Quarter 2018, is being constructed at a strategically located plot of 40,000m2, with an overall investment in excess of AED40million, and shall include a contemporary warehouse of 15,000m2 with an apex height of 13.7 metres & eaves height of 11.5 metres; split into 3 chambers offering bulk-stowage and ambient-temperature as well as air-conditioned (at 220 C) storage with Very Narrow Aisle (VNA) racking systems. The logistics centre, which is expected to meet its power requirement largely through a roof-top solar-panel system, shall also have an open-storage yard of about 6,500m2; a road-weighbridge, ancillary facilities as well as an office block.
Recognized by leading Commodity Exchanges such as the London Metal Exchange (LME) and COMEX, besides global trade-finance institutions, producers, traders and consumers, Access World (accessworld.com) operate a network of over 100 warehouses in more than 25 locations encompassing Europe & Middle East, the Americas, Africa and Asia, providing a range of services, including but not limited to cargo-handling, storage, freight-forwarding, customs-clearance, weighing, re-packing / processing and collateral management for commodities, and a wide range of general goods.
Formerly known as Pacorini Metals and operating in the U.A.E. since 2001, Access World are a subsidiary of the London Stock Exchange listed Glencore (glencore.com).
Founded in 1910, the Rais Hassan Saadi Group rank amongst the leading commercial enterprises in Dubai, with interests in ship agency, freight forwarding, NVOCC, , logistics, warehousing & Bonded CFS, insurance, travel & tourism, trading, real estate and oil field support services. The RHS Group has an excellent network of own offices and agents in the Gulf countries, the Indian sub-continent and East Africa.
Mr. Kishore Natarajan, General Manager – Access World Logistics L.L.C. added that the upcoming facility shall be listed with the LME, DGCX and in addition to non-ferrous metals, steel, OCTG, polymers, other industrial goods, the company shall provide efficient logistics solutions for soft commodities, FMCG / retail products, machinery & spares, project and general cargo.
The press release article Access World to build a 3PL facility in Jebel Ali Free Zone first appeared on Dubai News.
SINGAPORE: The National Trade Platform, a trade information management platform currently being developed in Singapore, has won in the e-business category of the World Summit on Information Society (WSIS) Prizes 2017.
The project is led by Singapore Customs and the Government Technology Agency, and the win represents the first digital initiative by the country to win in any of the 18 categories at the annual WSIS Prizes since these prizes were first introduced in 2012, according to a joint press release by the two agencies on Wednesday (Jun 14).
The NTP will replace the existing TradeNet and TradeXchange systems, and aims to support companies in the trade and logistics industry and adjacent sectors such as trade finance. It will be progressively rolled out from end-2017, the press release said.
The WSIS Prizes recognise digital projects worldwide which foster socio-economic development across categories such as e-government, e-environment, e-science and media, Singapore Customs and GovTech said in a joint news release on Wednesday. The winners were announced at the annual WSIS Forum in Geneva, Switzerland.
The project, named the National Trade Platform (NTP), will replace two current systems. Currently being developed, it will also support companies in the trade finance sector and will be progressively rolled out from end-2017, the release stated.
“The NTP will help businesses to streamline work processes, reduce inefficiencies of manual trade document exchange, and leverage data analytics for insights from their trade data, so as to be well-equipped for the digital economy,” according to the release.
This is the first time a Singaporean digital initiative has taken home an accolade from WSIS Prizes. The NTP beat four other projects to come tops in their category.
The article Singapore’s National Trade Platform wins international award was sourced from Channel News Asia.
27 June 2017 – The Monetary Authority of Singapore (MAS) announced today that it will streamline the regulatory requirements for banks seeking to conduct or invest in permissible non-financial businesses. In a speech at the 44th Annual Dinner of The Association of Banks in Singapore, Mr Heng Swee Keat, Minister for Finance, said that these will be businesses that are related or complementary to banks’ core financial businesses.
2. The regulatory framework separating banks’ financial and non-financial businesses (“anti-commingling framework”) was introduced in 2001 to ensure that banks remained focused on their core businesses and competencies. The banking landscape has evolved considerably since then. Technological advancements have created opportunities for banks to provide customers with integrated financial and related non-financial services through digital platforms. The proposed measures by MAS will give banks more flexibility to serve the needs of their customers while ensuring they remain focused on their core financial businesses.
Adjustments to Anti-commingling Framework
3. MAS will refine the anti-commingling framework for banks in two key aspects.
4. First, MAS will make it easier for banks to conduct or invest in non-financial businesses that are related or complementary to their core financial businesses.
(a) Banks need not seek prior regulatory approval before conducting or acquiring major equity stakes in permissible non-financial businesses. Banks will instead be required to notify MAS prior to doing so. MAS will continue to require banks to put in place appropriate risk management and governance arrangements to deal with the risks arising from these businesses.
(b) To limit exposure and ensure that banks continue to focus on their core businesses, MAS will cap such permissible non-financial businesses to 10% of the bank’s capital funds.
5. Second, MAS will allow banks to engage in the operation of digital platforms that match buyers and sellers of consumer goods or services as well as the online sale of such goods or services, if such activities are related or complementary to their core financial businesses. This recognises that online purchases of goods and services and the use of e-payment services are becoming increasingly integrated. MAS’ proposed refinement will allow banks to broaden their ability to provide a fuller suite of services to their retail customers. Beyond digital platforms, banks will need to seek case-by-case approval, as they should not be engaging in the sale of consumer goods or services as a business in its own right.
6. Notwithstanding the revision of the anti-commingling framework, banks will continue to be prohibited from entering certain businesses such as property development and the provision of hotel and resort facilities.
7. MAS will consult on the operational details of these policy changes by end of September 2017.
Notes to editor:
1 The anti-commingling framework was introduced in 2001 when the local banks had built up diverse non-banking businesses, especially in property. The framework was a pre-emptive move to ensure that banks remain focused on their core banking business and competencies, and avoid contagion problems that could arise from the conduct of non-financial businesses. The general thrust of the policy was to:
a. prohibit banks from directly undertaking businesses other than banking and financial businesses; and
b. prohibit banks from acquiring major stakes in a non-financial companies.
2 As the nature of financial services changed with technology, MAS’ anti-commingling framework has evolved. In 2011, MAS took a first step to give banks greater allowance to carry on non-financial businesses that are related or complementary to their core financial businesses. This was subject to specific conditions and the requirement to obtain regulatory approval from parent supervisory authorities.
The press release MAS Streamlines Framework for Banks Carrying On Permissible Non-financial Businesses first appeared on MAS.
Euler Hermes, the world’s leading trade credit insurer, today announced an innovative partnership with fintech credit risk analysis company, CRiskCo. With a focus on revolutionizing factoring, trade and supply chain finance, CRiskCo uses state-of-the art artificial intelligence (AI) credit analysis and fraud detection processes.
Christophe Spoerry, Euler Hermes Digital Agency (EHDA) co-founder, said, ” EHDA and CRiskCo are working together to evolve trade credit insurance and risk management, particularly at the transaction and single invoice cover levels. This has the potential to offer small-medium enterprises (SMEs) significantly more protection when doing business, by providing innovative, simple and affordable customer analyses.”
EHDA recently launched its first breakthrough product – Single Invoice Cover – which protects companies from non-payment by business customers. Cover is provided transaction by transaction while optimizing end-to-end supply chains and extending optimal credit terms to buyers. Based on a proprietary application program interface (API), it creates a seamless process for businesses, while facilitating a comprehensive and granular management of credit exposure.
CRiskCo uses its strength in harvesting and analyzing data to develop smart algorithms that can evolve the underwriting capabilities within the Single Invoice Cover product. Based on invoice-level data, CRiskCo reviews accounting data and applies prediction analytics and machine learning algorithms to provide businesses a credit score that assesses the probability of business success or default. The company helps vendors and financial institutions reduce underwriting time and costs using big data processing and cloud infrastructures. It monitors abnormal behavior of clients and clients’ debtors to predict fraud, and alert partners to limit their exposure.
Euler Hermes is the global leader in trade credit insurance, as well as a recognized specialist in the areas of bonding, guarantees and collections. With more than 100 years’ expertise, the company offers B2B clients financial services to support trade receivables management. Its proprietary intelligence network tracks and analyzes daily changes in corporate solvency among small, medium and multinational companies active in markets representing 92% of global GDP.
Euler Hermes Digital Agency focuses on technological disruption. Leveraging Euler Hermes’ global leadership and experience, it acts as a platform where innovators and entrepreneurs can take the driving seat. The EHDA mission is to incubate breakthrough ideas in trade finance to better serve customers, cultivate a digital culture and quickly create new disruptive fintech products. Digital Agency teams use data mining, machine learning and advanced algorithms to create and test client solutions for better risk and marketing decisions. EHDA and their partners focus on highly scalable credit risk technologies and services by fast tracking ideas into experiments and new products, many designed to serve start-ups in the alternative finance and fintech markets.
The post Euler Hermes Digital Agency Announces CRiskCo Partnership appeared first on Euler Hermes US.
IBM and a group of leading food companies are taking a major step towards making food supply chains more transparent with blockchain technology.
The consortium, which includes Dole, Driscoll, Golden State Foods, Kroger, McCormick and Company, Nestlé, Tyson Foods and Walmart, has announced a collaboration with IBM to test the tech giant’s blockchain solution “to identify and prioritise new areas where blockchain can benefit food ecosystems”, according to a statement released today.
The collaboration will build on a successful pilot that IBM carried out with Walmart earlier this year. During the pilot, Walmart discovered that it took six days, 18 hours and 26 minutes to trace a package of mangoes back to the farm in the US where they were grown, whereas with blockchain this was possible in just a couple of seconds. In that time, the blockchain revealed not only the farm from which the mangoes originated – but the exact path they followed on the way to the retail shelves.
“What we demonstrated working with Walmart is that the technology works: blockchain is an effective way to address some of the issues around traceability and transparency that we see in the global food ecosystem,” Brigid McDermott, vice-president of blockchain business development at IBM Research, tells GTR.
The next step, she says, is securing mass adoption and engagement from across the supply chain, which is exactly what the parties are now attempting with this collaboration. “The next part is equally important: to ensure that the offered value proposition is compelling to all of the players – not just the retailers, but the buyers, the distributors, the growers, everyone – and that they get engaged, so that we have both the solution and the ecosystem.”
As reported in GTR’s recent cover story, blockchain is ideally suited for tracking and tracing the physical supply chain. The technology ensures that records cannot be duplicated, manipulated or faked, and because it allows data to be entered, shared and viewed across the supply chain, the goods’ journey from farm to plate is immediately visible and transparent to all parties.
Some fascinating developments are already underway, including projects that use blockchain technology to trace diamonds, wine, coffee beans, cotton, avocados and fish.
The specific focus of IBM and Walmart’s pilot was on how the blockchain can solve food safety problems (by allowing parties to easily trace a contaminated product to its source and ensure safe removal from store shelves), but transparent supply chains are vital for many other reasons, including meeting sustainability standards and combatting fraud and trade-based money laundering.
McDermott explains that the food sector, and food safety in particular, was a good place to start because the various players have a shared goal and are thus willing to work together to improve the system for everyone.
“The collaboration that we need to drive critical mass is really strong here. Nobody is happy when their competitors have food safety problems, because it raises questions about the food ecosystem as a whole. So everybody has the desire to solve the problem,” she says.
The food companies will now be testing out the IBM blockchain solution, but exactly how it will be implemented is still being decided, she adds.
In a statement, Walmart’s vice-president of food safety Frank Yiannas says the company is looking forward to expanding its initial work. “Blockchain technology enables a new era of end-to-end transparency in the global food system,” he says, summarising it as “equivalent to shining a light on food ecosystem participants that will further promote responsible actions and behaviours”.
In addition to food safety, IBM is involved in a range of other blockchain supply chain initiatives, including one with Maersk that aims to help manage and track the paper trail of millions of shipping containers across the world.
IBM was also recently chosen to develop Digital Trade Chain, a blockchain trade finance platform for SMEs, powered by Hyperledger Fabric 1.0.
The post Food companies unite to advance blockchain for supply chain traceability appeared first on Global Trade Review (GTR).
FOUR partnerships were launched at the Singapore Regional Business Forum on Tuesday to give the Belt and Road Initiative (BRI) a boost.
The Singapore Business Federation (SBF) and Chinese Enterprises Association (CEA) inked a memorandum of understanding (MOU) to roll out an online and offline platform for regional businesses to connect and work on BRI projects in Singapore, China and other countries located on the Belt and Road route.
The projects include sharing BRI’s latest developments, conducting feasibility and evaluation studies, helping in project investment and financing, giving legal advice, offering business matching and showcasing successful projects.
In its third year, the SBF-hosted Singapore Regional Business Forum focused on exploring trade connectivity and tie-up opportunities offered by BRI.
Two other MOUs were also signed at the forum: Pacific International Lines, PSA International and IBM Singapore agreed to explore and develop proof of concept blockchain-based supply chain solutions; and SBF and the Philippine Chamber of Commerce and Industry joined hands to boost Philippine-Singapore trade and economic ties.
SBF and Singapore Press Holdings (SPH) also launched the English version of the Belt & Road Digital Portal to meet increasing demand for BRI-related news and provide a regional perspective of the initiative. The portal, which complements the Chinese-language Belt & Road portal rolled out last year, will further highlight Singapore’s role in BRI and the impact of the initiative.
Originally called the New Silk Road Economic Belt and 21st Century Maritime Silk Road, BRI is China’s ambitious multi-billion-dollar vehicle for connectivity, mutual development and cooperation with neighbours on its ancient trade routes and countries further afield.
According to SBF, the BRI Connect Platform started by SBF and CEA will be fully launched in the coming months and allow local companies to offer expertise in areas such as accounting, financing and consultancy to other firms wanting to participate in BRI projects.
The number of such projects contracted has been rising steadily since 2016, with combined business revenue of US$75.97 billion.
The English version of the Belt & Road portal, whose main sponsor is HSBC, is South-east Asia’s first comprehensive website focusing on BRI. The Chinese-language portal has been well-received, amassing a total of over 11 million page-views so far.
Explaining the introduction of the English-language portal, Anthony Tan, SPH deputy CEO, said: “With the Belt and Road initiative garnering prominence regionally, there is demand for a trusted website that carries news and developments on BRI.”
A survey report by SBF and the Economist Corporate Network, released at Tuesday’s forum, said that over 80 per cent of business leaders polled in the region agreed or strongly agreed that BRI represented an opportunity, though over 75 per cent claimed to be either very concerned or moderately concerned about its political risk, transparency and governance.
A panel discussion at the forum, moderated by Ho Kwon Ping, executive chairman of Banyan Tree Holdings, concluded that greater regional connectivity forged by BRI would be beneficial to businesses.
The panel included Liew Mun Leong, chairman of Changi Airport Group and Surbana Jurong Group; Jaime Augusto Zobel de Ayala, chairman and CEO of Ayala Corporation; and Lee Ark Boon, CEO of International Enterprise Singapore.
Delivering the keynote speech at the forum, Second Minister for Finance Lawrence Wong urged Singapore and Chinese firms to cooperate on developments in the Belt and Road countries.
“Singapore companies are natural partners for Chinese firms expanding into the region, especially in South-east Asia,” he said. “We have worked together on the Suzhou Industrial Park for more than 20 years. We have Tianjin Eco-city, we have close to 10 years experience.”
Mr Wong said that Singapore companies might not be able to build a railway or large-scale infrastructure, but they could do engineering, design, master planning, project management and financing, logistics and servicing as well as a whole range of other services.
Thirteen global banks have built a prototype trade finance application on R3’s Corda platform, described by the consortium as a “milestone” innovation.
The app, hosted on distributed ledger technology (DLT) will streamline the processing of sight letters of credit and is one of a number of trade finance apps R3 will be piloting on the platform this year.
Eleven of the banks involved have been named: Bangkok Bank, BBVA, BNP Paribas, HSBC, ING, Intesa Sanpaolo, Mizuho, RBS, Scotiabank, SEB and US Bank, however GTR understands that two further banks are active in the cross-border pilot, but did not wish to be named.
R3, which is a consortium dedicated to the Corda operating system for the financial system, is partnering with CGI – a tech firm – on the application development, but the banks have also been heavily involved in the development stage itself.
Chris Kahn, R3’s project lead, tells GTR that they hope to have a pilot of Corda ready to go this year and be in full production mode in 2018. Until then, a number of bolt-ons and apps will be premiered and worked through.
“We’re very open publicly that Corda is not 100% production ready just yet. We made a lot of progress last year but we’re focused on building platforms and working with partners to build apps on top of this, so this works really well with our roadmap and our timeline for Corda. We want to have that first pilot happen at some point this year.”
Cutting trade times
R3 says that this app will reduce transaction times, which in trade finance can take a number of weeks. Removing the paper-based process is one thing, though, in trade there are international standards and arduous checking processes, which are also time-consuming.
In other areas in which blockchain and DLT is being explored, such as high-frequency trading, the technology is often the biggest barrier to latency, but Kahn says this is not the case in trade finance.
“As you may imagine standards and legal processes take time. We want to make it as quick as possible, we don’t think it’ll be down to T+1 second, but a low single-digit number of days. So there’s no holdup on the technology side, trade financiers aren’t looking at thousands of transactions per second like high frequency trading and equity markets and things like that. They’re looking at several transactions per minute or hour or day, not thousands per second: the technology can handle it, but it’s just about how we can work on standards,” he says.
In May this year, R3 completed the first two of three tranches in a fundraising round, raising US$107mn, which is the largest DLT investment to date. There are more than 40 investors from various parts of the world, most of them banks, and these will be expected to be among the first users of the platform, which Kahn says will eventually have interoperability with blockchain platforms such as Ethereum and Hyperledger.
GTR reported in March that R3 had already held discussions with Hyperledger about migrating to that particular blockchain platform, which has also been extremely active in trade finance.
Meanwhile, member banks of the R3 consortium have welcomed the development. Marguereite Burghardt, global head of the trade compliance centre at BNP Paribas, says: “While LCs have not progressed as much as the open account business in recent years, they remain a good way to finance trade and mitigate risks. If the industry manages to make the whole process fully digital, transparent and straight through processing, this could mean renewed development and wider access to this financing technique.”
Vivek Ramachandran, HSBC’s head of growth and innovation, adds: “The prototype integrates a standardised user interface that allows carriers and shipping companies to prepare and validate shipping details when they on-board goods and deliver them to the buyer – even if they are on a different technology platform. To further enhance the prototype, we’ll continue to work with established and emerging title registry providers to ensure this solution can provide a secure and legal title transfer of goods in a live environment, and anticipate piloting the app on the R3 network before the end of the year.”
Gurucargo, an online logistics company based in Uruguay, will launch in the US next month, with the aim of cutting out “expensive middle-men” in the freight industry.
It is the latest online marketplace to attempt to take advantage of the antiquated and bloated shipping industry. As with the Hong Kong-based company Freightos, which launched last year, Gurucargo compares itself with travel platform Expedia, aiming for “no inflated broker prices or shady pricing, no paperwork and no delay in shipment due to price shopping”.
However, co-founder Andres Israel claims that unlike its competitors, it does not just focus on sea freight, but manages the delivery process from end-to-end, providing access to land and air cargo transit as well.
He tells GTR: “ The fundamental difference between Gurucargo and other similarly marketed platforms is that we aim to disrupt the industry by removing expensive middlemen, such as forwarders, allowing small businesses to book access to cargo shipping space directly. Additionally, we don’t focus on just sea-based cargo shipping, but provide an end-to-end solution that simplifies the booking of air, sea and land-based cargo shipping.”
Exporters and importers can access the system for free, with the company making its money from a 1% commission fee charged to the cargo shipping provider selected by the trading company.
The company is currently active in Uruguay, Brazil, Chile, Panama and Mexico and handles 1.5 million monthly transactions, with 15% monthly user growth. Despite the chronic overcapacity in the shipping market and historically low prices seeing established players go bankrupt, the US freight market is expected to grow significantly over the next five years.
“We believe that the timing of our launch could not be more opportune. There is no more clear symptom of the inefficiency of the industry when you have overcapacity and low rates, and yet there is still great frustration on the part of importers and exporters who cannot find consistent and reliable space on ships and are constantly arbitraged by expensive middlemen. We believe that through the application of disruptive technology we can bring stability of pricing and capacity to meet market demands and ensure the financial viability of the industry,” Israel says.
The post Uruguayan freight startup seeks to crack US market appeared first on Global Trade Review (GTR).
New fintech startup Populous is introducing smart contracts, blockchain technology and digital tokens to the invoice financing space.
Having raised more than US$10mn in crowdfunding in just five days, the company has now started piloting its new platform, which lets firms and individuals sell or buy invoices globally.
The early support has been overwhelming, Populous’ founder and CEO Stephen Williams tells GTR. “We’ve been getting a lot of interest from other invoice factoring firms and financial firms that are not on the blockchain, wanting to join the project, including banks as well,” he says.
The platform is much like a conventional invoice marketplace, but the underlying blockchain technology brings a range of advantages, such as cheaper transaction fees, more efficient and faster processing, as well as improved transparency and security.
Williams says the startup aims to lower the barriers to entry for investors, allowing for far more accessibility to the invoice finance market. And with lower costs, it will bring increased liquidity to companies looking for financing.
Built on Ethereum, the platform takes advantage of smart contracts and a decentralised network, but none of its operations use or rely on cryptocurrencies like bitcoin or Ethereum’s value token ether, which are often described as volatile. Instead, it uses Populous’ custom stable tokens – called Pokens – being stable in that they are pegged with fiat currencies around the world (although they can also be bought with other cryptocurrencies).
“With the smart contract, we have created our own tokens, our own currency in a sense, which the contracts accept,” Williams says. “For example, a guy from India wants to finance an invoice from Sweden, so he would place his money into the platform, and it will get converted into kroner Pokens via the smart contract.”
When an auction is live, investors can bid on an invoice within a timeframe of 24 hours. Their tokens are held in the smart contract until the auction has concluded, after which the contract executes itself depending on the pre-defined criteria, and the invoice seller automatically receives his tokens. These can again be redeemed in any fiat or cryptocurrency.
The whole process, however, isn’t completely autonomous, as the platform administrator still needs to carry out know your customer checks, and approve and manage clients’ accounts and actions.
The use of stable digital tokens, Williams says, is more straightforward, quicker and cheaper than conventional methods, especially for cross-border activities.
“If you think about the complexity around different currencies and settlements and consolidation of payments, it’s a much more efficient strategy to use tokens, and it opens up the market to the rest of the world,” he explains.
Initial coin offering
Having lined up clients, Populous started piloting its platform this week and will release the beta version in November, before going live in January next year.
The final steps were made possible after having received an unexpected level of support as the company was about to launch an initial coin offering (ICO).
An ICO is an alternative way for a startup to raise funds – as opposed to seeking investments from venture capitalists or banks – by issuing digital tokens. It is similar to an initial public offering (IPO) in that a stake of the company is sold to finance new projects, but in an ICO it is – like a crowdfunding process – open to any supporters keen to invest, and funds are typically raised in cryptocurrencies like bitcoin or ether.
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.
In Populous’ example, US$10mn+ was raised in ether by issuing so-called platform tokens – these are different from Pokens and are classified more as an asset. While Populous had announced it would issue these asset tokens in an ICO on July 16, it never got that far. Having initiated a pre-ICO a week earlier – in which the token was first offered to a limited number of potential backers – Populous sold out after just five days.
Williams says most investors were high-net-worth-individuals, who were especially keen on the innovative approach to traditional invoice financing. “A lot of the people have not invested in cryptocurrencies before and haven’t participated in any ICO before,” he says.
Ultimately, the big beneficiaries are the invoice sellers, primarily SMEs around the world, who will soon have yet another way to improve their cash flow, now with blockchain and digital money.
The post Fintech startup brings blockchain and cryptocurrencies to invoice finance appeared first on Global Trade Review (GTR).
Traydstream, a trade finance fintech firm, has entered into two partnerships to expand its newly-launched trade digitalisation and compliance screening solution.
It has partnered with PFU, a subsidiary of Fujitsu and the makers of Fujitsu scanners, which will allow it to add scanning services to its solution.
A second partnership with Lloyd’s List Intelligence, a global maritime intelligence service, will provide Traydsteam’s clients with access to its global network of specialist maritime data, including real-time tracking of shipping vessels, vessel characteristics and cargo information.
PFU’s industrial scanners will be the facilitator of Traydstream’s proprietary optical character recognition (OCR) engine, which can read, scan and instantly extract and structure paper-based information digitally, and which forms part of the solution’s first step to convert all trade documents to a digital format.
As reported by GTR in June, the OCR engine is not Traydstream’s main selling point, nor is it a new invention, but the company built one specifically for trade finance, after struggling to find one that met the specific needs of the industry.
“Trade business is made up by paper with different formats, fonts, issuers and structures,” Achille D’Antoni, co-founder of Traydstream, told GTR at the time. “We looked at a dozen OCR products, but none served the idea that we had, namely, to have an OCR that could put together all the different formats and make it work. That’s the reason we had to develop it ourselves.”
As part of the collaboration, Traydstream have also become a member of PFU’s Imaging Alliance Programme, which gives access to tools, resources and code to build innovative scanner solutions.
The partnership with Lloyd’s List Intelligence, meanwhile, will augment Traydstream’s compliance engine, the second part of its solution. This engine uses machine learning algorithms to quickly scrutinise the digital transaction data for a range of issues, such as blank fields, the inconsistency of names, industry-specific legislation, sanctions and country restrictions, to help banks and large corporations tackle anti-money laundering (AML) and compliance issues.
In a statement, the company says the two partnerships represent “the next phase in Traydstream’s expansion”.
The new capabilities will be incorporated into its digital solution and tested in its upcoming pilots, which are scheduled with three banks over Q3 and Q4 of 2017.
Traydstream is one of the many new companies that have seen the huge opportunities in entering the regtech space, aiming to ease the massive regulatory burden on banks since the financial crisis.
According to Thomson Reuters, the annual volume of regulatory updates increased by 492% from 2008 to 2015. JWG, a London-based think tank that focuses on financial regulation, has estimated that over 300 million pages of regulatory documents will be published by 2020.
The post New fintech partnerships to push automation in trade finance appeared first on Global Trade Review (GTR).
A Singapore-based company is aiming to cut the time it takes big banks to conduct investigations on suspicious trade finance transactions.
Most banks will have transaction and customer screening solutions in place, but Silent Eight founder Martin Markiewicz says that his company’s technology goes much deeper than solutions already on the market. The company uses machine learning and artificial intelligence (AI) to monitor transactions, flag those that are suspicious, and outline potential scenarios.
Rather than sifting through the data themselves, analysts are presented with a dossier of information about suspicious transactions within a minute.
The system, he tells GTR is trained to work and think as an analyst in a bank and does the work in a fraction of the time. Already, it has been picked up by a number of banks. Singapore’s OCBC has gone public with its piloting of the solution, while Markiewicz says that it is in the process of completing a proof of concept (PoC) with “one of the biggest banks of the world” that will show the software’s capabilities in trade finance.
We spoke to him to find out more about the company, the solution and where he sees it fitting into the trade finance industry.
GTR: What is Silent Eight and how does it work?
Markiewicz: We work with big banks and bring a fresh view to the whole compliance part of transaction monitoring and customer screening. We’ve built up a solution to help them do this more efficiently and accurately.
In a bank’s transaction monitoring process, they’re trying to figure out which transactions are suspicious and then want to investigate them. Usually what’s used by the industry is a rule-based system: you decide what you define as a suspicious transaction, you write a few scenarios to define these. You may be customer screening and wanting to avoid dealing with sanction-linked entities. Every time you’re doing these activities you want to look as deep as possible, you don’t want to miss something. But as you look deeper and deeper, it creates more and more work – sometimes more than you can handle.
Our system is trained to work like an analyst. Instead of passing it to a huge army of people, you pass it to our engine first, and our engine solves these cases. Only very suspicious ones are then passed for human intervention. We’re making this whole process scalable.
As a bank, you should look at every transaction as a potentially suspicious one, it should not depend on the size. Criminals are smart and will dodge the way your systems work. But if you inspect every possible outcome using this technology, you are saving on a whole team of analysts. We’re saying: if we use AI in this space, train our engine to work like your analysts, doing the work of an army of analysts over months in seconds, then leave it to analysts to review, it will be a scalable solution.
GTR: Where does it fit into the trade finance industry?
Markiewicz: The reason is the same for trade finance as for transaction banking. A lot of things in the bank have to be checked and investigated. In all the banks we work with, this process is heavily manual. If something gets flagged for investigation, an investigator sits down and does it manually. It depends on the case, but it can last for a very long time. You need a lot of people and the more investigations you do, the more you need.
We train our engine to work like an investigator, it will solve a case that would take an hour to crack, in a few seconds.
GTR: How does the risk modelling and data pulling process work?
Markiewicz: First of all, we sit down with the analysts and talk for a day or two to figure out where their data is coming from. We map the data sources and plug these patterns into our system. This is done by machine learning. We look at what the team of analysts was doing in the past and learn from that how the engine can behave according to their team standards or rules.
We don’t come up with those rules, we learn them from the bank. The analysts advise on the engine we put in the bank, then it learns how to operate within the bank. The end effect is something unique to every bank, because every bank will have a different set of data sources, of handling situations. We put the solution inside the bank, map the data sources and train it to work like one of the analysts from the bank’s team.
The process will obtain information from multiple systems and data sources – often not even inside the bank – also using search engines to fill in the gap, and then when the whole picture is ready, the conclusion is drawn using AI.
If a company is flagged for investigation, you would have to look at everything they’ve done for the past few months: all the counterparties they’re dealing with, all the directors and employees… to make sure nothing bad happened. Our engine will do what it does, this investigator’s job, automatically. It pulls all the evidence from inside and outside the bank in the public space and reasons like an analyst to come up with an explanation as to what happened.
GTR: In Singapore is there much competition in the regtech and AI space for trade?
Markiewicz: I don’t look at this from a Singapore point of view, but globally. Right now we’re scaling to match the global reach of the banking customers we have. When I look at the landscape right now, it’s not a crowded place. A lot of people want to try something, but I don’t see that many players who can tell banks: ‘Wwe can help you reduce your cost of doing processes by 50-80%,’ and then deliver.
We’ve found a nice spot for ourselves and we can deliver on our promises. I don’t see us being in a market like selling databases or cloud computing, where there’s a few dominant players. The scenario in our space is that there’s obviously a lot of people doing screening engines, and these engines are flagging up things to investigate. We’re not competing with them, we say: keep the screening engines you have now, but lower your threshold and allow more suspicious things to be flagged up, but instead of hiring more people to investigate this manually, automate the investigation part.
GTR: What is the next step in getting the solution market ready for trade finance?
Markiewicz: We’re finishing a PoC with one of the biggest global banks. The idea of the PoC is just to prove the business case, and to make sure the amount of money we’re charging for a license makes sense. We’re not testing if it works: the PoC will prove that we can reduce manual work by huge factors. Looking to the future, banks are going to have to be more thorough in investigations, hiring more people, costing more money. You won’t have to do all these when the regulator raises the bar if you have a system in place.
The trade industry’s newest fintech company, TradeIX, has developed the first trade finance-specific open-source blockchain platform.
The platform, called TIX, is described by TradeIX CEO Robert Barnes (former founder and CEO of PrimeRevenue) as “infrastructure to connect different players in the trade ecosystem”.
TIX is targeted at large corporates, banks, alternative financiers, business-to-business networks and technology providers. “We believe that connecting them all within the trade ecosystem will drive tremendous value,” Barnes tells GTR.
But it’s not only about connectivity. Daniel Cotti, TradeIX CFO, tells GTRthat the platform is effectively an “operating system” for the trade finance industry. “We develop our own applications, and banks and B2B networks can also develop their own applications for interacting with their clients using our technology,” he says.
TradeIX claims to be “rewiring global trade” by providing what it calls “the most connected and secure platform infrastructure” for the trade finance industry. It also says that its platform applications, developer tools and core protocol represent the dawn of the “internet of trade”.
But how exactly does the platform work? Barnes explains that TIX comprises four components: TIX Apps, TIX Developer, TIX Composer and TIX Core.
TIX Apps are client-facing solutions which run on the platform. “These could be legacy applications that a bank or B2B network has, or applications that they want to build on an existing platform,” he says. TradeIX also offers its own open account trade finance apps to support transactions and drive adoption of the platform.
TIX Developer provides APIs (application programming interfaces), SDKs (software development kits) and microservices (which structure an application as a collection of loosely coupled services) that enable users to integrate and interact. “That’s where the bank or B2B network works out how it connects to our platform,” says Barnes.
The Composer component is the trade finance “orchestration engine” that enables secure and flexible creation and management of the rules, logic and smart contracts for all interactions on the TIX Platform, including onboarding, underwriting, pricing assets, payments, credit and risk management, asset distribution and other critical data and functions to and from approved parties across the trade ecosystem . TIX Composer also provides the “world’s first graphical interface for the creation and management of trade finance smart contracts” reads the company’s website. “This defines the rules and sequence determining how the interaction between the users will work,” says Barnes.
TIX Core is the infrastructure where it all takes place, based on a combination of TradeIX’s own technology and the Hyperledger’s blockchain. “It provides secure, distributed data storage and bookkeeping, execution of complex business logic, automated contract enforcement, identity and reputation management, asset verification and tracking and a dynamic transaction and settlement engine, all in near real time between all parties in global trade,” reads the TradeIX website.
The platform is styled in such a way that it can be tailored according to the business requirements of the key parties: banks, large corporates or B2B networks.
The end result? Banks can lower processing and back-office costs, improve commercial offerings and generate new financeable assets, increase traceability and reduce risk. B2B networks, for their part, can generate additional revenue streams by simply connecting through the shared platform to multiple financial institutions, offering new value propositions to their client base.
“By applying blockchain technology to trade finance, the TIX platform reduces complexity and the number of intermediaries involved, eliminates the settlement, custodian and counterparty risk and manages credit risks better and more efficiently,” explains CTO Andy Berti.
Barnes became interested in distributed ledger technology (DLT) years ago because of the way it addresses the issues of trust and provenance, which are key to the trade finance industry, but also the manner in which it can connect the trade ecosystem and rid it of its siloed approach, which he calls “incredibly dysfunctional”.
Last year he and his colleagues noted the developments taking place at Hyperledger and its peers and decided to take the punt that the technology was going to evolve.
At the same time the company built out its own APIs and other tools needed to develop connectivity.
“We depended on the fact that blockchain was going to come to us, and our bet was correct – it started to move closer to where we needed it to go,” says Barnes. “But we also needed to make the platform incredibly flexible to orchestrate and deliver trade finance based on the various business requirements.”
GTR caught up with Barnes for an exclusive interview ahead of the launch:
GTR: What problem is TradeIX trying to solve?
Barnes: If you look at the way trade finance operates today, it’s a high-cost, high-maintenance, old-world model which involves multiple parties and an over-reliance on human intervention and interaction. A lot of it has got antiquated paper-based systems. What we’re doing is creating a highly automated, more open and inclusive infrastructure.
The infrastructure is everything: we build the ecosystem, and it’s up to the participants to build value-added components to plug into the ecosystem.
We’re not driven by a consortium, but rather a means and a desire to create a commercial model that really works and drives value.
If you looks at the R3s of the world, the difference with us is that we’re 100% focused on the trade finance ecosystem.
GTR: What timeline are you working to, and who has shown interest?
Barnes: We’re in the pilot phase and will be doing full transactions at the end of June or beginning of July.
At the moment we’re waiting for the legal side to catch up with the technology.
We currently have a large customer going live with a bank. And we’re in the process of signing up two large B2B networks. We will be doing transactions with one of them in Q4, across their suppliers.
We are also finalising a large insurance partnership, which will allow to credit underwrite on a transaction-to-transaction basis.
This is all going live over the next few months.
GTR: How do you structure your fees?
Barnes: The TradeIX platform is designed to be ultra-flexible depending on individual corporates, B2B networks and banks’ needs, and easily adapts and integrates with existing set-ups. For the banks we can, for example, use a subscription model as we don’t get in the way of their transactions.
Or, for example, B2B networks can use our platform on a transactional basis: we share whatever revenue they make by originating to banks. We are flexible and it really depends on the type of party working with us.
GTR: Are you focused on the primary or secondary market?
Barnes: We’re focused on both. The advantages we have over other platforms that connect parties is that whoever is buying in the secondary market will see the asset and understand the true origination. This provides more underlying visibility and trust.
GTR: What can’t the platform do?
Barnes: What we can’t solve for is the traditional KYC that a bank needs to do. We can make the information more readily available, open and secure, and connect with the other parties that can help with that. But we don’t solve for that. And we don’t solve for the legal side either.
Where we do solve for is the execution side – the operation and technology. That’s where we’ve placed our focus.
The post TradeIX launches blockchain-powered shared platform for trade finance appeared first on Global Trade Review (GTR).
Payments provider WorldFirst has launched World Account, a platform allowing small businesses and online sellers to open local bank accounts around the world and make international payments.
Presented as an alternative to UK banks’ international business banking services, the platform will be available in the UK and Europe on limited release in Q3 2017, online and through a mobile app, with additional functionality currencies expected to be added later this year.
It aims to help SMEs manage their cross-border payments by opening multi-currency (British pound, euro and US dollar) bank accounts at no cost in the various countries where they do business, therefore reducing foreign exchange expenses.
Jonathan Quin, co-founder and CEO at WorldFirst, says: “Our research shows that over 1.5 million SMEs are trading more than £78bn a month across international borders. This is a significant contribution to the UK economy. It’s time that small and medium-sized businesses enjoyed the same products, price and service that was only previously available to big businesses.”
“Our World Account should solve what is a pain point for many ambitious businesses who buy or sell internationally enabling them to manage their international accounts in one single platform wherever and whenever they want. We think this will be the world’s most flexible financial platform to support a new era of international business.”
Blockchain technology has moved one step closer to production phase in trade finance, with the launch of Hyperledger Fabric 1.0.
Fabric 1.0 is Hyperledger’s first production-ready blockchain platform, and can be used by banks to bring the pilots and proof of concepts they’ve been trailing for months, to the operational stage.
While other platforms, such as R3’s Corda, are vying to become the primary blockchain platform for trade finance, Hyperledger believes that this release – which is backed by Linux open source technology – is ready to be used in important transactional operations.
Speaking to GTR from Washington DC, where he had been addressing the “blockchain caucus” on Capitol Hill, Hyperledger’s executive director Brian Behlendorf says: “I think we’re seeing first production use this year. My hope is that these are systems which can be turned on to production grade. Whether they can handle tens of thousands of transactions, that’s another question. There’ll be a ramp up over the next couple of years, but there are plenty of transaction networks today that are transactions per second, that are more modest in scale but are high value and will be in production this year.”
The challenge will be creating critical mass, which could be hundreds of users in complex supply chains. That in mind, expect to see production first in smaller, niche areas of trade and supply chain, or private network transactions on blockchain for trade finance.
Move to real case uses
A beta version of the software has been available for some months, and developers have been working on business uses for trade finance, some of which are developing quickly. These are some of the initiatives that are expected to move into production phase quickly.
At the end of June, a consortium of seven banks announced they had chosen IBM to develop Digital Trade Chain, a blockchain trade finance platform for SMEs. When faced with a choice between Fabric and Corda, R3’s shared ledger technology, the developers plumped for Fabric 1.0.
Speaking to GTR at the time, Keith Bear, vice-president of financial markets at IBM, said: “A key element of it is around the ability that Hyperledger Fabric 1.0 has to create channels. So if KBC are doing a transaction with Rabobank, for example, then other banks in the consortium don’t have access to that. You get the advantages of blockchain in terms of trust and transparency, but unlike the bitcoin environment you don’t have everything exposed.”
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.
Because most banks have been working on small-scale solutions as part of their pilots or PoCs, there won’t be a huge amount of updating required in order to implement Fabric 1.0, Behlendorf says.
“There are enough API changes and language changes to merit a cautious process of upgrading. There is a guide on the websites, regarding upgrades, that folks should follow. Unless you’ve been writing tens of thousands of lines of chain code, which people probably haven’t, probably more like a couple of hundred, you might have to modify some of those hundreds. But your application logic shouldn’t change. If you started with 0.6 six months ago, it could be that you’ve evolved your thinking about your use case anyway, and it’s time for a refresh,” he says.
It’s fair to say that a certain end of the trade finance has been awaiting this release. Simon Taylor, co-founder and blockchain director at consultancy 11:FS – who previously managed Barclays’ blockchain development, tells GTR: “I have to say they’ve done well and delivered everything they said they would,” adding that he would like some more time to work with the solution in order to get a fully-formed view.
The post Hyperledger Fabric 1.0 moves trade finance blockchain towards production appeared first on Global Trade Review (GTR).
Bitcoin continues to be the subject of much debate and controversy, but for many African companies the choice is simple. For them, the cryptocurrency is not at all related to anonymous black market business – it’s about enabling them to flourish. Sanne Wass speaks with Elizabeth Rossiello of BitPesa to find out more.
“It’s like shampoo: you try it, it works, you use it.”
It is with a smile that Elizabeth Rossiello compares bitcoin to shampoo when asked if it is hard to convince African businesses to use the highly-disputed virtual currency.
But the issues she has set out to solve are of a more serious nature. “This is not a light problem. These are companies that are really struggling and when you’re struggling, you look for other solutions,” she says.
Rossiello is the founder and CEO of BitPesa, a pan-African exchange platform that uses bitcoin to help businesses make or receive international payments.
She started the company in Kenya in 2013, after having worked in investment banking in Europe and then moving to Nairobi in 2009 to work in microfinance. There, she discovered the everyday hurdles faced by Kenyan businesses: despite a real need, they lack ways to move money across borders. Paying a supplier abroad or receiving a payment from a regional customer is not only expensive – according to Rossiello the average cost is 12% in Africa – it is also highly manual and inconvenient, and can take weeks.
That was how the idea of BitPesa was born. Fast forward four years to 2017, the company helps thousands of clients make international payments through the de-centralised bitcoin network. Outside of Kenya, it now also operates in Uganda, Tanzania, Nigeria and the Democratic Republic of Congo, and works with licenced brokers with access to local accounts all over the world.
As BitPesa expanded, so did the problems it found it could solve using the digital currency. “In Nigeria, not only were we fighting plain old delays, inefficiencies and high cost, we also started to fight currency controls. A big problem there is that any time you want another currency, whether its Chinese renminbi or Swiss franc, the only way to get it is to first buy dollars. Dollars are restricted, and a lot of companies don’t even want dollars,” Rossiello says. Nigeria today is BitPesa’s biggest market.
Where a payment would often take up to two weeks through a local bank, BitPesa can do it in a few minutes, and no longer than an hour. It is not only convenient and quick, it increases the liquidity of businesses, which avoid having to settle transactions in dollars.
“Bitcoin is a really incredible business tool,” she says. “And it’s especially great for trade finance, any kind of cross-border activity.”
So how does it work? Rossiello gives an example of a Nigerian company that needs to pay its supplier in China. Via the BitPesa app or website, the Nigerian customer makes a transfer to BitPesa – in the local currency and through its local bank. BitPesa then buys bitcoin and sells it on to a Chinese broker, a licenced partner, who makes sure the money goes into the recipient’s local bank account in China.
Amounts of up to US$10,000 are transferred automatically, while larger sums have to be approved by BitPesa.
“In one hour or less, my Nigerian customer has made a payment in naira, he has all the documentation and his partners in China has been paid,” Rossiello says. “Often people take out guarantees of letters of credit for this period when their payment is being made. So it actually reduces the need for trade financing, because they can do instant payments. Suddenly you remove the two weeks of nonsense.”
Real world impact
Since the cryptocurrency was first released in 2009, bitcoin has been a contentious entity. Critics point to the fact that its popularity hinges on its anonymity and thus the ability to use it for illicit activity.
This is an argument that Rossiello often hears, with people claiming that they only use bitcoin to “cheat the system”.
“Everybody is critical of it, and get crazy about it,” she says.
But she emphasises that BitPesa has all the relevant regulatory licenses in the countries in which it operates, including from the Financial Conduct Authority in the UK, and it undertakes all the required know your customer and compliance obligations. The company even has a seat on the Central Bank of Nigeria’s committee for virtual currency.
Another common concern is the price volatility of the bitcoin. According to Rossiello, that does not matter for the users of BitPesa, who are guaranteed the price shown when the payment is made. She says the risk is removed by the fact that the company settles instantly.
Once the bitcoin is sent, it is immediately changed into local currency and delivered locally. BitPesa doesn’t hold bitcoin, it merely uses it as a medium. “I’m just buying and selling African currencies – and bitcoin – all day long,” Rossiello explains.
In fact, the end-users are often traditional companies in that they only hold local currencies, and do not necessarily know anything about bitcoin or that it is used for their transactions. For them, the experience is much like sending money through any other mobile service.
But the impact on the ground is huge. It enables companies to do things that people elsewhere in the world may take for granted, such as paying their employees on time.
Today, the average transaction size on the BitPesa platform is US$25,000, and most use it in more than one trade corridor. The company’s largest customers transfer US$100,000 a day, sometimes even more.
Most of them start out small, Rossiello explains.
“Nearly all our customers grow with us. They all start small and grow. A lot of them enter new markets with us. They may have thought, ‘I could never enter this adjacent market,’ but now that it’s so easy to make payments, or collect payments, or hedge the risk, because you can do instant payments, they start to enter these new markets.”
She references a fast-growing company that launched in Kenya after having received a major investment from a venture capitalist in America. “They quickly went to Uganda and Tanzania using our model as a business tool and they got to test out the market and see which one would work for them, just because we were there. They asked, ‘Where are you? We will go where you are’.”
Partnering with banks?
Going forward, BitPesa will continue to open up its platform in new payment corridors to better serve the growing number of people doing business in Africa. This year, it is looking to enter Ghana, Morocco and Egypt.
What’s more, the platform is not only suitable for payments, but can help bridge the funding gap for SMEs in Sub-Saharan Africa, a function the company is already exploring.
Earlier this year, BitPesa partnered with BitBond, a Berlin-based firm that connects fixed-income investors with small business owners who need loans.
The integration between the two platforms enables borrowers in Kenya, Nigeria, Uganda and Tanzania to receive loans from anywhere in the world in their local currency, paid out directly to a mobile money or bank account, within minutes.
Rossiello hopes to add other features to the platform in the future, such as partnering with an invoice company. She says she would love to see the platform integrated with banks too, but that might have to come at a later stage.
“A lot of these banks are such slow-moving ships,” she ends.
In August last year, UK company Provenance announced a scheme to track tuna on the blockchain. In this pilot, Indonesian fishermen sent a text on the company’s blockchain-based app every time they successfully reeled one in. The fish was automatically registered as a digital asset that had been caught legally and sustainably.
From an ethical point of view, tuna is doubly problematic for consumers. Yellowtail tuna is often eaten in sushi and sashimi dishes, yet it is an endangered species that should only be fished sustainably. Also, a lot of the tuna we consume is caught by slaves. Greenpeace describes working conditions aboard fishing vessels “as among the worst in the world, and that includes tuna boats”.
Provenance’s pilot uses blockchain technology to eradicate those risks. For one, the blockchain is immutable – which is a fancy computer science way of saying “can’t be changed”. The digital certification stays with the tuna fish until the point of consumption, when it obviously ceases to exist. This immutability means the “digital fish” cannot be duplicated, counterfeited or tampered with: its provenance is guaranteed. And because blockchain allows data to be entered, shared and viewed across the supply chain, its journey from line to plate is transparent and visible.
What may sound like a quirky science project is actually hugely important work. This was one of the early signs of how blockchain will change supply chains in the years to come.
Why is it needed?
Banks and companies are under huge pressure from consumers to meet sustainability standards. Regulators are clamping down on trade-based money laundering practices, with the Hong Kong government, for one, establishing ground rules for tackling this systemic problem. Blockchain technology can be used to ensure goods are both sustainable and authentic.
But perhaps more practically, using blockchain along with existing tech such as radio frequency identification (RFID), the internet of things (IoT), smart devices and GPS can help satisfy operational problems that plague supply chains everywhere.
“I would say that track and trace technology is at the heart of what we offer. It’s an immediate problem that companies encounter every day: they lose track of goods, and when they finally get a bill from the logistics provider there are lots of charges, and they’ve no idea where they came from,” says Rebecca Liao, vice-president of business development and strategy at Skuchain, a California-based company that builds blockchain solutions for supply chains.
In the trade finance industry, the chatter around blockchain has rightly been in line with the modernisation of an antiquated industry. At the GTR Australia Trade Forum in Sydney in May, Westpac’s global head of trade, Adnan Ghani, listed the three criteria blockchain must meet if it is to reach critical mass: instantaneous transactions, reduction in fraud, and being cheaper than existing proprietary technologies.
The sector is delivering a sea of proof of concepts, but critical mass is a dot on the horizon. Much greater progress has been made on the physical supply chain. Banks’ growing role in financing these supply chains exposes them to such developments. They will inevitably be taken along for the ride. Indeed, some
are already onboard.
Also at the Sydney forum, Digby Bennett, regional sales director at China Systems, described a project which used blockchain to ensure the authenticity of halal goods in the Middle East’s Islamic banking sector. These goods, financed through sharia-compliant processes, must pass through stringent checks in order to meet requirements, Bennett said. This is an arduous task that must be inspected at every port on the supply chain.
China Systems worked with Emirates Islamic Bank to write a blockchain solution that allows them to share this information with Islamic banks on a ledger, via the Dubai Central Bank. That way, they can see which goods are compliant, what financing has been issued and which banks are involved. A real-world need, met using blockchain technology.
Thomas Verhagen, senior programme manager at the Cambridge Institute for Sustainability Leadership (CISL) believes blockchain’s role in passing environmental and sustainability standards information up the value chain will help banks clean up their own portfolios.
He says: “In exchange for correct entry of such data, it will be possible to offer services to participants that are upstream in a value chain. An example of this could be providing valuable information, as well as financing, to smallholders in agricultural supply chains in exchange for correct data entry in the distributed transaction ledger of that supply chain.”
In the supply chain this process is well underway, covering goods from household to luxury. We spoke to those creating the most interesting projects to date.
In the coffee industry, the demands on buyers and suppliers are high. Skinny-jeaned hipsters from Dalston to Williamsburg insist on exotic blends that must be sourced sustainably. And for the 125 million people that make a living growing coffee, it is essential that they get a fair wage.
With this in mind, US company Bext360 created a machine that grades the coffee beans grown on plantations in Africa, at farm level. The machine combines with a blockchain-based app developed by Silicon Valley company Stellar to connect farmers with an instantaneous marketplace, and more control over the price they receive.
Stellar co-founder Brit Yonge explains how it works. “In the coffee market the beans themselves aren’t priced until later on in the supply chain. They’re collected from the farmer and sent to the market, and actually graded later on. Bext thought: ‘How can we price these beans earlier on, upstream in the supply chain, so growers are capturing the value they’re grading?’”
The machine analyses the beans at the farm, and makes the weight and grade available to both potential buyers and sellers via the blockchain-powered app. The pair can then negotiate a fair price. But when Bext360 figured out how to grade the beans without taking them to market, they were faced with another problem: the transfer of value.
“That’s where we came in,” Yonge says. “Stellar is a blockchain solution. In this scenario, it’s a patented protocol that allows any asset to be represented as a token. Banks are excited by this because they can represent virtual reality currency as a token and not have to deal with a digital asset like bitcoin. In this case Bext were creative, they saw you can have tokens representing different grades of coffee. As the machine is assessing the quality of the beans, they can issue these tokens that essentially represent an IOU to the farmer. That’s the last part of the problem: how do you actually represent the value?
“We worked with Bext to allow them to issue these tokens. The app puts these transactions on the blockchain… You’re aware of whose beans have been assessed in whatever way, and that they’ve been paid, which is a problem in some markets where people are being robbed. You know that this person produces so many grade A beans and should be compensated as such.”
With legislation such as the UK Slavery Act in enforcement, this type of solution could offer buyers and lenders reassurance that their supply chains are clean of such practices. It’s the kind of real-use scenario that excites a nascent industry.
Collin Thompson, co-founder of Hong Kong-based blockchain company Intrepid Ventures, tells GTR: “These coffee beans are going to Starbucks anyway. It gets 10,000 of these small growers and they don’t know where they came from… What if there was an insurgency that took those beans over and it got into the supply chain? You want to be able to know how it got into the supply chain and if people are getting paid fairly.”
Arguably the most ambitious efforts we encountered in researching this article were in the US cotton industry. As with most physically traded goods, the paperwork is arduous. “For a 40-container shipment of cotton, you’re talking a three-inch binder full of paper. And that’s a small shipment of cotton,” says Mark Pryor, CEO of The Seam, a commodities software company based in Memphis, Tennessee.
Traceability is another pain point. In order to work with high-profile buyers such as Levi Strauss, H&M and Gap, cotton must meet standards set by the Better Cotton Initiative – a multinational non-profit that promotes the use of organic cotton. These two needs in mind, The Seam has been working on a blockchain solution that will, in effect, “kill two birds with one stone”.
“We’re going to have a consortium-based blockchain initiative that will be available from field to fabric and everywhere in between. That’s why we came up with the ‘cotton blockchain’, not the ‘agri blockchain’. This is specific to cotton, and the nuances and idiosyncrasies that commodity presents. We’ve had a very positive response from all areas of that supply chain, from retailers, to spinners, banks, freight forwarders, to producers, gins, warehouses, merchants and everyone else to come together and work with us to make this a reality,” Pryor explains.
Of course, this won’t be the first usage of blockchain in the cotton industry – last year, the first cross-border transaction between banks using blockchain technology took place on a shipment of 88 bales of cotton from the US to China, involving Commonwealth Bank of Australia, Wells Fargo and Skuchain.
However, Pryor describes The Seam’s work as more of an ecosystem than a solution, given that it will include all areas of the supply chain. Three pilots are set to be launched, having successfully moved through the proof of concept stage: one for smart contracts, one for physical shipment of cotton, and one to enable retailers to track and trace the finished product.
The company has been developing the blockchain ledger in house and will start the three-pronged pilot in July, where it will be used to track and trace a real deal.
Pryor explains: “A lot of the pilots out there aren’t real. They take one little subset of supply chains and say they’re done on blockchain, but it really didn’t prove that the technology worked. It was something that was done in a room or maybe somebody took a piece of data and walked it across to another office. That’s not what we want to do.
“We want to do a real contract. We’ve already agreed with the parties, it can’t be disclosed at this point. But they’re major merchants, textile mills and players along the way. We’re going to do a real contract trade in July. Then we’re looking at the export shipment and documentation to process flow and all that, a digitised ledger for verifying information along the supply chain, that will happen in January.”
The timescale is dictated by the nature of the industry: cotton trades typically happen in July, and this will be a real trade, conducted alongside trades done using traditional processes.
Shipment occurs after the harvest, between November and January. Finally, the retailer will have visibility back over the supply chain by February, at which point they will have received a cargo of cotton, tracked from the farm, along the blockchain.
According to Paul Sam, who leads Deloitte’s fintech practice in China, a blockchain project reaches critical mass when two to three players in an ecosystem move first. “It’s like a snowball effect,” he tells GTR.
For the “cotton blockchain”, critical mass is something it already has. The Seam is partly owned by Cargill, Olam and Louis Dreyfus, three commodity trading giants. The initiative already involves the biggest cotton exporters in the world. The Seam is also talking with banks such as BNP Paribas and HSBC about getting involved. If the pilots go well, Pryor says, the support is already there to roll it out on a fully operational basis.
“Agri companies have an existential need,” says Collin Thompson at Intrepid Ventures. “There’s a compliance issue. If a bank launders money for Pablo Escobar, they pay a US$1bn fine and that’s it. But if you have a problem in the supply chain, in the food area, the government will shut you down!”
This “existential need” means food companies cannot afford to get it wrong when it comes to sourcing their goods. According to Rebecca Liao at Skuchain, blockchain can be applied to pretty much every product in the agri food space to ensure quality control. Skuchain has been working with companies looking to improve their traceability across the board, from dairy to fruit. In one case, Skuchain was approached by a commercial bank that finances commodity trading.
“Their problem is that their internal policy says you can only offer [the set] commodities price for this good. Take avocados for example,” she explains.
The bank is only able to offer the quoted commodities price for standard avocados, but what happens when the farmer says his avocados are organically grown, or they’re non-GMO. The bank has no way of verifying the provenance of these avocados. What, for example, happens if they got mixed up with a batch of non-organic avocados?
“They need some sort of track and trace technology that will allow them to offer a higher price for premium avocados and stop losing out on deals,” Liao says – and so Skuchain built them a solution that bolts onto their existing Enterprise Resource Planning (ERP) or Electronic Data Interchange (EDI) systems.
She explains: “The farmer would be the starting point. Using the Skuchain mobile app, the farmer would apply a code to the shipment of avocados. They scan that code using the mobile app. As soon as they do that they can get an encrypted POP code, which stands for proof of provenance, onto the blockchain ledger. That indicates to the ledger: now we have this unit that has been recorded onto the blockchain.
“There can be as much data as you want associated with that POP code. So the farmer would say it’s non-GMO, organically grown, the temperature he stores the avocados after they’re picked, their spoilage, etc. This can be done manually or using sensors that can provide this information – sometimes these sensors are more accurate than people.”
The POP code stays with the avocado throughout the supply chain, from the farmer, to the truck, to the shipping company, until it ends up as guacamole on a brunch plate in Singapore or Melbourne.
Liao continues: “We have unitisation technology on the back of the POP code, which means they can be subdivided, aggregated onto a master POP code. There are several ways you can manipulate this piece of encryption, but they will continue to track the goods all the way from point of origin to the hands of the consumer.”
Meanwhile, the only thing people involved see is a smartphone app. The blockchain is invisible, in the same way that most people won’t be aware that they’re using SMTP for email. This is one of the major advantages of distributed ledger technology: the investment is at the top of the supply chain. Everybody else accesses it through a smartphone or laptop, meaning its rollout to remote farms and plantations in, say, Indonesia or Tanzania, is relatively simple.
Diamonds (and wine)
Having spent the early part of her career working to make objects more traceable through RFID technology, Leanne Kemp knows a thing or two about supply chains. When she saw what people were doing with cryptocurrencies a few years back, solving issues around visibility, double spend and secure transfer of value, she had a “eureka” moment.
“Because I hadn’t come from a payments background, I looked at the technology in cryptocurrencies and started applying this to an object instead of a piece of money,” she tells GTR. By applying the same principles used in bitcoin platforms to physical assets, she saw how blockchain could be used in the physical commodities space. Everledger was born, and now Kemp is one of the most respected authorities on blockchain in the world.
Everledger is at the cutting edge of blockchain-based track and trace. The company has devised solutions that ensure the authenticity of high-value goods, such as diamonds, wine and fine art. Each of these markets faces crises of authentication, after being plagued by issues around counterfeiting and ethics. There are said to be more bottles of New Zealand wine on the market today than have ever been manufactured, while the problems of blood diamonds are well-documented.
“The marriage between provenance and procurement is a natural evolution towards transparency. With transparency comes sustainability both at an ethical trade level and from a financial point. Now we’re seeing governments pass legislation to ensure transparency and sustainability is incumbent upon directors and companies in the local market in the UK – you can reference the Slavery Act as one of those pointers,” she says.
Most notably, Everledger created a global digital registry for diamonds, powered by blockchain. The platform digitally certifies diamonds traced through the Kimberley Process – the global initiative established to stop conflict diamonds from entering the mainstream market. Diamonds may be “dumb objects” [aka those inanimate objects which are not smart – unlike modern mobile technology], but they lend themselves to such a solution better than, say, slabs of copper which are indistinguishable from one another.
Kemp explains: “The beautiful thing about white diamonds is the perfect bedrock, we can incarnate the physical object into the blockchain. We can extract 40 metadata points around an identity, and actually digitally incarnate that. Also, the diamond industry has control points. It uses certain types of science and scanning to then give the opinion of the expert, but also match that with machine.
While we’ve seen how blockchain can be used in areas such as food and textiles, Kemp says these supply chains are “complex” and perhaps don’t lend themselves as naturally to the technology as diamonds.
“We’re very disciplined about what we do, and applying it to items like art and antiquities, things that have generations, that need to consider provenance. We’re not really too excited about things like fish, or tracking perishable items, we think that can be best served by other companies.”
Trade credit insurer Atradius has rolled out its new global credit management portal, giving businesses “an advanced way to complete credit insurance transactions”.
Under the name Atradius Atrium, the portal enables its customers to constantly monitor and smoothly interact with their buyers and with the insurer. They will have instant access to information about buyers’ creditworthiness, such as buyer ratings, current cover and claims.
With a clear picture of the buyers, companies can apply directly and immediately for cover. In most cases, credit limit decisions are immediate.
The Oracle-based portal is now part of Atradius’ digital platform. In a statement, the company says Atrium is “designed to evolve with digital advancements and user requirements”, and more features will be introduced over the next six months.
The company’s chief market officer, Andreas Tesch, says that “in a nutshell” the launch gives Atradius’ customers a “more efficient, user-friendly service platform” as it simplifies account activities and reduces the risk of suffering losses caused by payment defaults.
“This new approach and technology is a tremendous timesaver for all and reduces the possibility of errors,” he says. “Our customers can essentially check a buyer’s creditworthiness during a deal negotiation and have cover approved before the end of the meeting. It supports better risk management and growth potential with a clear insight on safer trade for them.”
Atradius plans to expand the portal to include customer access to detailed portfolio overviews highlighting trends and events that may impact the policy, direct access to other information relevant to the users as well as claims filing “in just a couple of clicks”. Atrium will also be able to provide a clear overview and information for brokers and agents to manage multiple policies and customer portfolios.
UniCredit has started testing with EBA Clearing’s pan-European, real-time payment platform RT1.
Customers in Italy and Germany will be the first to use the new payment method, due to be available from November.
Around 39 financial institutions are working on the development of the new infrastructure, which will provide a real-time payment processing platform, 24 hours a day, across the single euro payments area (Sepa).
Some 30 financial institutions are planning to connect to RT1 in November while another 70 banks are preparing to join in 2018.
Jan Kupfer, global co-head of global transaction banking at UniCredit says: “The introduction of euro-denominated instant payments will enable us to better support the payment businesses of both our corporate and retail customers.”
CEO of EBA Clearing, Hays Littlejohn, says: “Our aim was to provide the European payments industry with a fully-fledged pan-European infrastructure system from the start date of SCT Inst (Sepa instant credit transfer) and we are happy to see that RT1 meets the requirements of our funding banks as well as of a growing community of fast followers across the continent.”
The European Payments Council (EPC) proposed the idea of a Sepa instant payments scheme in November 2015 following shifts in consumer, corporate and retail expectations around payments processing. The EPC then published the legal framework and technical specifications for the scheme in November 2016, giving payment providers one year to go live.
Currently, Sepa credit transfers are processed in batches whereby a corporate will send payments to its bank at various times during the day, and all transactions will be submitted and cleared at the end of the day.
SCT Inst will be processed at a transaction level, for payments up to €15,000. As soon as a payment service provider recognises that the Sepa transaction is an instant payment, they will process and clear the payment in real time, with money visible in the receiver’s account within 10 seconds.
The SCT Inst scheme, which is not mandatory, will be available across 34 Sepa countries.
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