Author: Sanne Wass

R3 and 39 firms trial new blockchain-based KYC utility

From Global Trade Review (GTR) | By Sanne Wass

R3 has trialled a global, blockchain-powered know your customer (KYC) utility together with 39 banks, firms and regulators.

The four-day collaborative trial, which took place in May, saw the completion of more than 300 transactions on an application designed and built by Synechron on R3’s Corda blockchain platform.

It enabled participants, which included the likes of BNP Paribas, Deutsche Bank, ING and Société Générale, to communicate and manage test customer KYC data across the network. The solution works as a “self-sovereign” model, allowing corporate customers to create and control their own identities, including relevant documentation. Banks can request access to the data, whilst customers can approve requests and revoke access.  Any updates that are made become automatically visible to banks with permission to access the data.

R3 says in a statement that the trial reduced duplication and costs by eliminating the need for each institution to individually attest to and update KYC records.

A utility like this could be a game-changer for the trade finance industry, where the cost and complexity of compliance with regulation, including KYC requirements, remain a big barrier to the availability of finance. A shared utility could help ease mundane compliance processes that are often duplicated across financial institutions.

While KYC utilities have already being explored by other firms, to date most have had limited success due to low uptake.

But R3 and Synechron believe that the use of blockchain technology will make their solution more appealing to the industry.

“We’ve had increasing demand from our network for blockchain-based KYC solutions as they recognise that blockchain can address many of the challenges facing existing utilities,” Jane Kenyon, project lead at R3, tells GTR.

Tim Coates, US blockchain lead at Synechron, emphasises the fact that the application is decentralised and gives parties control of their own data as key differentiators from existing utilities.

He adds: “Blockchain’s immutability used as a new verification mechanism, and its peer-to-peer nature enabling greater data privacy are two of the native features that have attracted many in the KYC sector to blockchain.”

While Kenyon could not give details on a specific future timeline, she did say that R3 is working with a number of partners to develop applications on CorDapps to facilitate KYC on Corda, adding: “We are open to working with members who want to take these solutions forward in their institutions.”

The banks and corporates involved in the project include: ABN Amro, ALD Automotive, Alfa Bank, Bank ABC, Bank of Cyprus, BCI, BNP Paribas, China Merchants Bank, Commercial International Bank, CTBC Holding, Deutsche Bank, DNB, Hana Bank, ING, KB Kookmin Bank, Banca Mediolanum, Natixis, National Bank of Egypt, NH Nonghyup Bank, Qiwi, Raiffeisen Bank International, RCI Bank and Services, SBI Bank, Shinhan Bank, Société Générale, US Bank and Woori Bank.

In addition, a number of regulators and central banks took part, including Banco de la República (Colombia’s central bank), Federal Reserve of Boston, Superintendencia Financiera de Colombia and Superintendencia de Banca Seguros y AFP de Peru.

According to Kenyon, a planned feature of the fully developed KYC application would include an observer node that would be assigned to the regulators, giving them visibility on the entire network.

The post R3 and 39 firms trial new blockchain-based KYC utility appeared first on Global Trade Review (GTR).

Euler Hermes’ insurtech brand expands coverage for exporters

From Global Trade Review (GTR) | By Sanne Wass

Insurtech startup Credable is expanding the geographical coverage of its invoice insurance offering to cater for a large demand from exporting SMEs.

Credable, which was launched in Sweden in March, is the first stand-alone brand that has come out of the Euler Hermes Digital Agency. Using the latest insurance technology (insurtech), its fully digital platform offers Swedish SMEs an on-demand insurance option that covers against late or unpaid invoices on a single invoice or buyer.

During the pilot phase, which started in September 2017, Credable focused on insuring SMEs’ business in the four Nordic countries, but added another 13 European countries, including Italy, France and the UK, at the product launch. Now, adding another seven countries, Swedish SMEs can get coverage in 24 jurisdictions across Europe.

Speaking to GTR, Credable’s managing director Richard Garnier says this geographical expansion was only planned for later in the year, but the firm decided to “accelerate” its efforts in direct response to feedback from existing and potential clients.

“We’re continually talking to our users and prospects to understand their real-world experiences. One theme that kept emerging time and time again is how concerned SMEs are when they trade internationally, and how having the support of Credable and Euler Hermes is of interest to them,” he says.

Of the new countries covered by Credable are Germany, Belgium and the Netherlands, which Garnier describes as “significant additions to the portfolio”.

He adds that export is a “particularly good use case for our customers”, as the product provides reassurance to companies that their clients in distant territories are trustworthy financial partners and their payments are protected if any problems arise.

This is done through the platform’s two main features: first, it provides an instant “traffic light” risk calculator for an SME’s potential customer. Once a Swedish SME has been accepted onto the platform, it can search a database and see the creditworthiness of a firm it is about to do business with. For this, the platform uses an API (application programming interface) to access Euler Hermes data on millions of companies around the world in real time.

Secondly, the user can automatically get a quote for insurance coverage of an invoice, and instantly buy it. The platform calculates the premium cost, based on the invoice size, the payment terms offered and the credit rating of the buyer.

Apart from the geographical expansion of the platform, today’s announcement also includes the addition of new features, one of which allows SMEs to retroactively insure their invoices.

Credable now has 400 registered SME users, many of whom are now repeat customers. But the insurtech company believes there is much space for growth, noting in a statement that Swedish SME exporters represent “a huge market opportunity”, as most trade credit insurance today does not cater for SMEs’ need for easy and flexible insurance.

As such, Garnier says the quick growth is partly due to Credable creating more awareness around its product.

“Trade credit has been largely contained for a large-corporate audience,” he says. “Here we are taking a new market on a journey, and quite often that starts with explaining the concept, and perhaps the initial transaction being local, with a known supplier, and as we explain the application’s ability and as their trading grows, they look to use it internationally.”

Going forward, Credable will continue to add more countries in which Swedish SMEs can insure their exports. Garnier says countries outside of Europe are “on the agenda”, but can’t comment on the specific timing.

What he can say is that, by the end of the year, the firm will start expanding beyond Sweden to countries in which SMEs can buy Credable’s insurance.

The post Euler Hermes’ insurtech brand expands coverage for exporters appeared first on Global Trade Review (GTR).

IBM’s latest blockchain venture brings microfinancing to Africa’s SMEs

From Global Trade Review (GTR) | By Sanne Wass

IBM is rolling out a new supply chain finance platform across Africa, using machine learning algorithms and blockchain technology to extend microloans to small businesses.

The tech giant’s research lab in Kenya announced today that it is working with Twiga Foods, a business-to-business logistics platform for kiosks and food stalls in Africa, on a new concept for disbursing microfinancing to businesses using a blockchain-enabled platform.

The partnership has allowed Twiga Foods, which helps farmers distribute bananas, tomatoes, onions and potatoes to 2,600 kiosks across Kenya, to add financial services to its offering and thus scale its reach. Having piloted the platform with 220 small food retailers across Kenya over an eight-week period, the trial saw its customers increase their order size by 30%.

The platform is now ready to be rolled out across Africa – to new sectors and suppliers – by the end of the year.

The idea is to utilise something that most people in Africa have – mobile phones – to bring them something they haven’t – access to working capital.

During the pilot, all loans were executed via mobile and went directly towards working capital for the businesses. When a retailer had an order delivered from Twiga, they would receive an SMS with options for financing that order. The retailer would then respond, confirming which loan option they preferred. The average loan was around US$30, offered for four and eight days with an interest rate of one and two percent, respectively.

Speaking to GTR, Andrew Kinai, the lead research engineer on the project at IBM Research, says the platform is about “linking SMEs, their suppliers and the banks” and using alternative data to give lenders the confidence they need to provide financial services.

Small businesses are hugely important for most African economies, yet they often have difficulty accessing sufficient credit due to the complexities of financing processes, high loan costs, collateral requirements and lack of a credit score.

“These vendors are quite small, so if they were to go to a bank, the bank would probably want an audited account or collateral and things like that. These small businesses don’t have that,” says Kinai. “So what we’re trying to do with our solution is to use alternate data, which can give a good idea of how well a business is doing and leverage that to provide credit to these small-scale vendors.”

This data, which includes information on purchase history as well as repayment, is crunched by the platform’s machine learning algorithm to predict the creditworthiness of a vendor. Once the credit score is determined, the blockchain platform, powered by Hyperledger Fabric and executed through smart contracts, will manage the entire lending process, from application to receiving offers, to then accepting the terms and eventually repayment.

Connecting multiple parties, blockchain is an optimal technology to manage the loan process, as it becomes transparent to all permissioned parties involved, from the lending bank to the borrower’s bank and the loan applicant themselves.

While the pilot didn’t involve any banks, the next stage of the project will be to bring in lending partners, Kinai says.

The companies are also set to expand the project to more of Twiga Foods’ vendors, as well as to other suppliers, including outside of Kenya, by the end of the year.

“For this pilot, we were doing it with one supplier, but the vendors often have other suppliers. Each of these suppliers has a snapshot of how that business is doing. So in the next step, we’re envisioning we’ll have mutable suppliers, to give an SME or vendor a ‘financial identity’, which is composed of all of these snapshots from various suppliers. A blockchain network would be very important in managing this,” Kinai explains.

It is hoped that such a financial identity stored on the blockchain could help SMEs across Africa access a wider range of financial services in the future.

The post IBM’s latest blockchain venture brings microfinancing to Africa’s SMEs appeared first on Global Trade Review (GTR).

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