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16 Oct 2017 – Digitization in the freight transport industry is inevitable, and investment in technology savvy startups is a gateway for formerly traditional transporters.
The world’s third-largest shipping line has recently shown it is willing to partner with digital natives offering innovative solutions. The company was one of the four major shipping lines to invest in the New York Shipping Exchange, an ocean freight contracting startup. CMA CGM also partnered with Alibaba to boost its visibility to small and medium enterprises in China, showing its deals are not limited to startups.
Yet, beyond those two deals, opportunities abound for traditional carriers to boost customer service with digital tools.
Since the process of information integration within digitization involves all participants, the benefits of transparency can be applied to each step in the supply chain: pricing, contents of containers, tracking products’ location en route, among others. Online customs processing, too, is emerging as a popular tool.
Given all the different use cases, it would be unfeasible for a single company’s R&D team to develop all the new tools. That’s why established companies worldwide, like D.B. Schenker or UPS, are targeting startups to facilitate their expansion and growth.
In Saadé’s words, adapting to a “digital ecosystem” is a “transformation,” and startups — developed for specific business cases through an incubator — can help accelerate the process.
This article first appeared in Supply Chain Dive.
IBM and a number of banks have launched a new blockchain-powered solution to clear and settle cross-border payments using cryptocurrency. The move could see cryptocurrencies integrated with IBM’s trade finance blockchain projects at a later stage.
As Sibos, one of the world’s largest finance events, commences today, the tech giant announces it has developed a new cross-border payments solution in collaboration with blockchain startup Stellar and KlickEx, a money transfer operator in the South Pacific region. More than 13 banks are involved in the project.
The aim is to help simplify the way money is transferred across borders. Today, making international payments in multiple currencies can be costly, labourious and error-prone and require multiple intermediaries. By utilising the Hyperledger Fabric blockchain framework and Stellar’s cryptocurrency lumens, IBM says it can reduce the time it takes to transfer funds across borders “from days to seconds” as well as the cost to do so.
Speaking to GTR, Keith Bear, vice-president of global financial markets at IBM, says the payments solution is currently in “an early stage of implementation”. The parties have successfully conducted pilots and the first transactions are now flowing on it. As to when it will go into production, Bear says is still to be “determined through consultation with the banks that we are working with”.
The participating banks include BBVA, Sumitomo Mitsui Financial Group, Mizuho Financial Group, National Australia Bank, Bank Danamon Indonesia, Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, Kasikornbank Thailand, RCBC Philippines, TD Bank, Wizdraw HK and “several big names” which have not been named. They will help expand the solution beginning early next year.
The initial focus will be on retail and SME payments in the South Pacific region, but ultimately the solution is designed to augment financial flows worldwide for all payment types and values. In the future, it could also be expanded to enable parties to enter trade agreements, manage trade documentation, secure letters of credit and finalise transaction terms with immediate payments.
“Clearly the ultimate value will come from a high level of adoption, but we are starting off with a low-volume environment around the Pacific Islands, which is a great place to start because it’s – relatively speaking – a neglected payment corridor. It demonstrates what the potential is and how it can work in practice and then we can work out, together with the banks, how to scale from there,” he says.
Settlement instructions are provided via smart contracts on the Hyperledger blockchain platform, but the actual settlement will be carried out via Stellar’s network. Stellar’s custom cryptocurrency lumens will “act as a bridge currency between fiat currencies on each side of the transaction”, Bear explains. The customer doesn’t touch the cryptocurrency themselves.
KlickEx, he adds, will serve as a market maker, buying and selling lumens for the banks to facilitate the process.
This method for settling cross-border payments is already being used or explored by some banks and payment providers. More than 100 financial institutions have to date joined Ripple’s enterprise blockchain network, RippleNet, to settle global payments leveraging blockchain technology. SEB, for one, has processed more than US$180mn in payments for a large corporate customer between Sweden and the US over the network.
Another example is BitPesa, an online payment platform, which helps thousands of clients in Kenya, Uganda, Tanzania, Nigeria and the Democratic Republic of Congo make international payments using bitcoin to settle between fiat currencies.
Cryptocurrencies in trade finance
IBM’s decision to enter the cryptocurrency space may be of particular interest to the many players already working with the tech company on a range of other blockchain projects.
For example, IBM and seven major European banks – the Digital Trade Chain (DTC) consortium – are soon going live with a blockchain trade finance platform for SMEs. The platform will enable buyers and sellers to agree on their transaction in a smart contract, to follow the physical flow of the goods through a track and trace system and to obtain financing.
IBM is also working with UBS and a number of banks on a similar project under the name Batavia. Both powered by Hyperledger’s Fabric, the platforms focus on the digitsation of processes around trade finance, but they use conventional methods for the payment itself.
According to Bear, the fact that the technology is consistent means that the new payments solution is “well-suited” to integrate with its other projects. As such, we could well see other consortia extend their trade finance platforms to involve payments using cryptocurrencies.
“Whilst the immediate implementation is just focused on payments, the potential is certainly to go into other areas as well. The overall design we are taking is certainly extendible to other asset classes,” Bear says.
“This solution is another example, on top of the what’s happening with DTC and Batavia, to potentially provide a better service to SMEs or corporates using trade finance facilities from their banks. Not only by providing more credit facilities, but in this particular example being able to reduce the cost and time of the payment transactions as well.”
IBM notes in a statement that financial institutions in the future will be able to choose the settlement network of their choice. This could involve the likes of Ripple or bitcoin. The solution will also be able to support the exchange of central bank-issued digital tokens.
Compliance software provider Accuity has partnered with R3 to integrate its financial crime screening tools with the Corda distributed ledger technology (DLT) platform.
It is Accuity’s first foray into blockchain, and it will mean that those who are licensed to use its software will be able to screen transactions conducted on Corda without leaving the platform.
An ‘oracle node’ has been developed which can be activated by Corda users to screen transactions for compliance with areas such as the EU fourth anti-money laundering directive, the USA patriot act, as well as regulatory guidelines from the US’ Office of Foreign Assets Control (OFAC) and the Monetary Authority of Singapore.
“This means customers working on DLT won’t have to take transactions outside DLT and screen them separately,” Bharath Vellore, product innovation manager at Accuity, tells GTR.
The node was developed in Singapore, where Accuity have been working on blockchain for some time. The company chose to launch with R3 because the “partner ecosystem is already in place”, meaning they are able to bounce ideas from banking clients who are also members of the R3 consortium.
However, Vellore confirms that Accuity is also studying developments on Ethereum and Hyperleger with a view to developing on those platforms too.
It is ready to use, but the company is still ironing out the details of a licensing model, Vellore says. However, the solution will likely see commercial use in line with the production phase of blockchain for trade finance, which is expected in 2018.
The past two years have been dominated by proof of concepts (POCs), but a number of banks in Asia have told Vellore that they expect to migrate certain aspects of their operations to DLT next year.
R3 for its part has been very keen to ensure that its Corda system meets regulatory requirements. Enabling banks to use Accuity software on DLT may offer peace of mind about the system’s security.
“KYC and AML compliance is a key regulatory requirement for financial transactions. Accuity is the known market leader in the area of financial crime compliance screening. We look forward to leveraging our combined expertise to address solutions in this space,” says Todd McDonald, co-founder of R3, in a statement.
R3 has been announcing a flurry of partnerships in recent days and weeks. The most recent was with trade finance digitisation company Bolero, which partnered with R3 to redesign its electronic bill of lading on blockchain.
It is also working with a 13-bank consortium to design a prototype that will process sight letters of credit, partnering with fintech startup TradeIX and 12 banks on an open account trade finance platform as well as building a blockchain-powered syndication marketplace, with Finastra and seven banks.
Commerzbank, Bank of Montreal, Erste Group and CaixaBank have joined an initiative by UBS and IBM to build a new global trade finance platform powered by blockchain technology.
Under the name Batavia, the platform is an expansion of a proof of concept that IBM and UBS launched at Sibos in 2016 and have since concluded successfully.
The aim of the platform is to give organisations around the world a place to openly and easily build multi-party, cross-border trading networks worldwide. It will give participants in a trade transaction a shared, immutable record, which will improve transparency and efficiency, minimise the risk of errors and dispute as well as drive more trade business.
Among other things, transacting parties will be able to track the progress of a shipment. Agreements will be written into a computer code – a so-called smart contract – which enables payments to automatically be released incrementally along each step of the process. The platform will also facilitate the financing of transactions across all types of trade, whether goods are transported by air, land or sea.
Speaking to GTR, Fabio Keller, project lead for Batavia at IBM, says the development of the platform, which will be powered by the Hyperledger Fabric framework, has now commenced. The first phase involves the development of a minimum viable product (MVP) and the pilot transactions are scheduled to take place with customers next year. Only when pilots have concluded will the parties define the future timeline, including when the platform will go into production.
The four additional banks have joined to help scale up the project. Development will happen in consultation with transportation industry experts and the banks’ customers to ensure that the platform is flexible and intuitive and can be commercialised.
Keller expects to welcome new partner banks during this phase or immediately after. “The value sits in the network, and the larger the network, the better, so that we have real coverage over the whole globe. We would like to grow in a controlled manner, because if you have to find solutions among 50 banks, it’s impossible. You need to define the MVP with a small number of participants, then you can start growing,” he says.
A “cornerstone” of the platform will be connecting the smart contracts with the internet of things (IoT) sensors, which could automatically feed data (on, for example, the location of the goods) into the contract. This feature may however be tested only at a later stage, points out Keller.
It a statement, the banks conclude that by helping to connect participants in a trading network, the platform has the “potential to transform global trade”.
The open nature of Batavia, the statement says, will encourage broad participation by many banks, vendors and regulators, and will help open new trade corridors and bring new players into the market.
For one, Jordi Fontanals, CaixaBank’s COO, notes that not only will blockchain drive digitisation in the trade space, but, “more importantly it paves the way for international projects in collaboration with multiple partners” and the opportunity to bolster the bank’s foreign trade services.
The post More banks join UBS and IBM’s trade finance blockchain project appeared first on Global Trade Review (GTR).
Banking consortium R3 has pushed blockchain technology closer to production with the launch of its distributed ledger technology platform (DLT) platform, Corda v1.0, and called on banks to “make your choice”.
The platform, which the company describes as “blockchain inspired”, has been developed over two years with members of the consortium and will enable institutions to transact directly using smart contracts. As an open source platform, third parties can develop and implement applications, known as CorDappsusing Corda’s common code and protocols.
Corda v1.0 follows the open source release of the platform last year. R3 says it has now achieved stability of Corda’s core application programming interface (API) allowing for third parties to develop applications for the platform, with a guarantee that any future changes will not disrupt their work.
“The blockchain industry in reality is still quite young,” says R3 CTO Richard Brown to GTR.
“Many of these platforms are changing quite rapidly. What we delivered today will allow developers to plan and predict and hit deadlines. We committed today to keep the core designs, the foundations if you like, fixed. Which gives huge predictability and huge confidence to those building on top of it.”
Brown explains that by fixing the foundations, R3 has given away the right to change key parts later.
“I am aware of platforms that have plans to make quite significant changes that will force application developers to change their applications. We had to be very sure that our design was right and stable. It’s a big step and to my knowledge we are the first blockchain firm to make that commitment.”
“Time to make your choice”
Other platforms are also in the race to become the primary platform for trade finance. In July, Hyperledger released Fabric 1.0, which is backed by Linux open source technology, and also designed to be used for transactional operations.
In June, a consortium of seven banks announced they had chosen IBM to develop Digital Trade Chain (DTC), a blockchain trade finance platform for SMEs. When faced with a choice between Fabric and Corda, the developers went for Fabric 1.0.
Swift has also been working on a proof of concept (PoC) with the beta version of 1.0, for its nostro account reconciliation tool, within its global payments innovation (gpi) initiative.
Last month, R3 announced it has partnered with fintech firm TradeIX and 12 international banks to develop an open account trade finance application that will operate on Corda. The application will be co-developed with logistics companies and industry parties such as the ICC Banking Commission and the International Trade and Forfaiting Association (ITFA). However, the early users of the application will be only banks and their corporate clients.
As the race heats up, Brown argues that the roadmap for large-scale deployment is now clear and that it is time for developers and entities “to make your choice”.
“The whole idea of these platforms is to allow the users to reduce their costs and share data with privacy with their peers. If lots and lots of incompatible platforms get deployed it doesn’t work,” he says.
“If you work through just the economics of this, it all points to a small number of platforms gaining widespread adoption. [However,] it won’t be one – different platforms solve different problems, so it will be three or four different platforms.”
Commenting on Hyperledger’s release earlier this year, and the selection of Fabric 1.0 by DTC, Brown says that as premier members of the Hyperledger project, R3, like in all businesses, both competes and collaborates with different organisations: “With respect to Fabric, I think we’ve set ourselves on a deliberately different course. The way that Corda is being designed, the problems we are trying to solve and the approach we’ve taken is different. There are multiple platforms in the market for different use cases. I don’t expect Corda to be selected for each and every one of them.”
Diverse and rapid uptake expected
Having deliberately designed Corda for its members, predominantly large banks, the consortium says it has also seen a lot of engagement from other sectors including insurance, health care and government entities, as well as a large number of smaller scale startups.
“We have discovered through the open source community that people are finding use cases for it outside its original purpose. This tells me we have hit on the right design – if people are independently discovering that it’s capable of delivering,” says Brown.
With the launch of Corda v1.0, R3 now expects to see a ramp up in production deployment. So far numerous PoCs and pilots have been tested on the platform, which are now expected to go into production stage.
“My expectation is now that we have this commitment to API stability, the ramp up will be rapid. Those who may be waiting on the sidelines can now choose to engage with confidence,” says Brown.
“I suspect in the first half of next year we will be seeing publicised production deployment and then it will ramp up further later in the year.”
Meanwhile, at R3 the company plans to work on extra features for enterprise deployment and large-scale deployment over the coming months.
Risk and financial crime compliance solutions provider Accuity has expanded its global innovation team with two leadership appointments.
Neela Das has been appointed to lead the company’s global, multi-disciplinary innovation team, with regional hubs in London, Paris, Chicago and Singapore. She will be working with Ronald Hobbs, who has been appointed director of technology for innovation.
Das brings a wealth of experience working in disrupted markets. She held the digital director role at New Scientist, and as part of the senior management team developed its digital strategy. At Accuity, she will develop the innovation strategy, collaborating with the risk, compliance and payments business and technology teams across the globe.
Hobbs will lead the innovation team’s engineering experts, having been the technical brains behind Accuity’s dual-use goods trade compliance solution. He joins after multiple technical leadership roles within RBI International. As the industry has evolved so have the projects he has tackled, delivering everything from centralised matching and information retrieval systems to the secure cloud-based evolution of key software products.
Accuity’s innovation teams operate like startups within the larger organisation, working directly with clients to develop proof of concepts. Since 2015, the innovation team has tripled in size.
“Companies need to innovate constantly so they can respond to evolving regulation and new ways of working,” says Hobbs. “We look forward to creating cutting edge solutions for our clients. Going forward, Accuity will focus on utilising the latest technologies, such as distributed ledger technology, artificial intelligence, machine learning, predictive analytics and big data, to adapt to the rapidly changing and evolving financial landscape.”
The Dutch development bank FMO has come together with fintech firm Above & Beyond to launch an innovation programme that aims to stimulate collaboration between banks and fintech firms and accelerate financial inclusion in Africa.
FinForward is a nine-month programme that links banks in Africa with global fintech companies via an online platform. After being matched, FinForward will offer a sandbox environment where the parties can safely and securely test and integrate new financial technology solutions into the bank’s systems.
Speaking to GTR, Andrew Shaw, a senior fintech specialist at FMO, says the platform works like a “business-to-business app store”, where banks can “plugin” new digital and innovative solutions and services to their operations.
The initiative, he says, came out of an interview process with 65 of its financial institution clients around the world, who divulged their difficulties in finding, choosing, testing and implementing fintech solutions.
“One of the things they told us was that they really want to understand how fintech works and how they can integrate with it, but they find the massive world of fintech quite confusing. They don’t know which are the right to integrate to,” Shaw says.
FinForward will promote a range of solutions, from lending and alternative credit scoring to payments and cybersecurity. Shaw sees trade finance in particular as one of the key areas of African finance that could benefit from the programme.
What links the fintech companies is their ability to help banks reach groups that have traditionally been financially underserved – such as women-owned businesses and small enterprises – giving them better access to the financial system and financing.
EFL is one of the fintech firms taking part in the programme. It applies psychometrics and behavioural science (measuring borrowers’ character, abilities and willingness to repay a loan) to assess risk and make digital credit assessments of people who may lack the credit history that lenders usually require.
“That might be, for example, a woman-owned business in a country where women can’t own land and they don’t have collateral for a loan,” Shaw says. “So you are bringing in excluded businesses into the financial system and helping them to unlock their potential.”
About 100 fintech firms are already integrated into the platform from a previous programme run by Above & Beyond in Latin America. The initiators have now opened registrations for new providers and hope to “bring in some more Africa-centric fintechs and homegrown solutions”, Shaw says. The aim is to reach 200 solutions on the platform when the application round (which ends on November 25) and subsequent vetting process have taken place.
FMO expects to bring on at least 12 African financial institutions from its client network to the programme, which is sponsored through a Dutch government fund for lending to micro businesses.
The post Dutch programme to boost bank-fintech collaboration in Africa appeared first on Global Trade Review (GTR).
5 Sept – International Finance Corporation (IFC), a member of the World Bank Group on Tuesday has invested USD 10 million as equity in Power2SME, an e-commerce platform that helps small and medium companies to buy raw materials at bulk prices and get working capital without collateral.
In addition to the investment, IFC will also advise Power2SME to help expand beyond its current 14 states, improve its ability to provide working capital to SMEs by adding more banks as partners, and increase the number of users on its platforms by up to 10 times in five years.
Power2SME is backed by venture capital firms such as Kalaari Capital, Accel Partners, and Inventus Capital. Started in 2011, the company has raised about USD 33 million so far, excluding this round. The company also counts former UIDAI Chairman Nandan Nilekani as its angel investor.
“IFC’s extensive experience in supporting the SME sector through financing and deep networks with banks and financial institutions will help us in our vision to make SMEs bankable,” said R Narayan, founder and CEO, Power2SME.
He added that Indian SMEs are critical to making India a manufacturing hub and we must foster the sector if we are to meet the national imperative of inclusive growth.
“We have aggressive plans to boost our revenues and continue on our path of profitability,” he added.
Micro, small and medium enterprises form a large part of the Indian economy, accounting for 45 percent of the country’s industrial output and 40 percent of its exports.
There are 48.8 million MSMEs in India, which employ 111 million people.
There is a critical shortage of long-term funding for the sector. Some estimates put the gap at USD 320 billion against a total of demand of USD 500 billion. India has the largest base of SMEs in the world after China, contributing only 8 to 9 percent to the GDP, compared to 60 percent in China.
“Our investment in Power2SME will spur greater VC interest in the SME sector in the country and support India’s vision to become a global manufacturing hub,” said Ruchira Shukla, Venture Capital and Private Equity Lead, IFC South Asia.
She added that by working with SME-focused companies and partner financial institutions, we aim to improve access to finance for over one million SMEs in the next five years.
Following the recent slowing of start-up funding in India, IFC has made a strategic decision to increase its venture capital investing.
The company makes direct equity investments in start-ups and as a limited partner in venture capital funds.
The article Power2SME raises USD 10 mn from International Finance Corporation (IFC) was taken from MoneyControl News.
The Wholesale Trade Industry Transformation Map (ITM) was unveiled today by Mr. S. Iswaran, Minister for Trade and Industry (Industry) at International Enterprise (IE) Singapore’s event, “Digitalisation of Trade – New Mindsets, New Skillsets”. The ITM will help companies digitalise to enhance global growth and productivity, and targets to create 10,000 new jobs by 2020. Comprising over 34,000 firms, the wholesale trade industry provides livelihoods for more than 325,000, accounting for 9% of Singapore’s workforce in 2016.
In 2016, wholesale trade contributed S$47.3 billion (12%) to the nation’s gross domestic product (GDP). The industry continues to grow strongly as Asia’s rising population, urbanisation and consumerism drive trade flows to meet the region’s increased demand for food, infrastructure materials, fuel and electronics, and more.
However, wholesale trade is highly susceptible to global trends such as rising protectionism as it is an externally-oriented sector. Technological advancements are also transforming the global marketplace, business models and job functions.
The Wholesale Trade ITM has been developed in collaboration with a wide range of key stakeholders, covering industry players, trade unions, trade associations and government agencies. The key strategies are described below.
Building trade connectivity through digital marketplaces and platforms
Digital business-to-business (B2B) e-Commerce transactions are expected to reach US$6.7 trillion by 2020. The ITM includes plans to accelerate global trade connectivity, facilitating and capturing value from e-commerce trade flows, as well as increasing SMEs’ market access and productivity through digital marketplaces and platforms.
Key initiatives in this area include the ASEAN Digital Trade Facilitation Platformand a Cross Border Cognitive Supply Chain Solution. The former, led by Singapore Logistics Association (SLA) and in partnership with GeTS Global (Global e-Trade Services) expected to be ready in Q4 2017. It will foster collaboration among ASEAN logistics associations and facilitates customs clearance through a single window and allow easier and more efficient movement of goods across regional borders.
The collaboration agreement for the Cross Border Cognitive Supply Chain Solution was signed at the ITM launch event today. It is a digital trade platform by GeTS Global and IBM Asia Pacific and enables 350,000 connected trading partners on IBM’s Supply Chain Business Network (SCBN) to do automated customs declaration at 18 customs nodes across the world, including Singapore, China, Indonesia, Thailand and the US. It is equipped with cognitive capabilities and predictive analytics to help traders mitigate disruptions, risks and costs. For instance, in bad weather conditions, it will recommend an alternative source for the obtaining of goods and alternative routes for shipment to ensure timely delivery.
The last initiative in the digital platforms area is to work with trade associations and private enterprises to help SMEs list on digital marketplaces, enabling them to access new markets and enjoy economies of scale through shared services.
Strengthening enterprise capabilities and growing a vibrant ecosystem of wholesale trading enterprises in Singapore
A new government agency, named Enterprise Singapore, will be formed through the merger of IE Singapore and SPRING. Leveraging IE Singapore’s core strengths in internationalisation and SPRING’s expertise and levers in helping SMEs, the newly-formed agency will offer companies a holistic and integrated network to build capabilities and access overseas markets opportunities. Going forward, Enterprise Singapore will be the lead agency driving the transformation of the wholesale trade industry.
Developing industry-ready talent equipped with deep skills for digitalisation and internationalisation.
The ITM foresees a demand for specialised talent with digital skillsets such as digital marketing, global supply chain and data analytics will grow as companies address new business models. The range of roles with greater demand include Digital Marketers, Data Analysts, Regional Business Development Managers, Risk & Compliance Officers and Supply Chain Specialists.
There are ongoing partnerships with Workforce Singapore (WSG), National Trade Union Congress, Institutes of Higher Learning and industry players to identify job opportunities and prepare PMETs (Professionals, Managers, Executives and Technicians) and students for careers in wholesale trade. The Wholesale Trade ITM skills framework, to be completed by the second-half of 2018, will provide industry-validated insights into the skillsets required for the future of trade.
IE Singapore and the Singapore University of Social Sciences (SUSS) signed a Memorandum of Understanding (MOU) today to develop a Certificate/Minor Programme in International Trade, covering areas such as digitalisation, analytics and regional cultural intelligence.
IE Singapore, WSG and the Singapore Business Federation (SBF) signed another MOU at the ITM launch to develop a Professional Conversion Programme (PCP) to nurture a pipeline of talent with regional market knowledge.
IE Singapore, WSG, the Singapore Management University (SMU) and International Chamber of Commerce (ICC) Academy launched a PCP for International Trading Executives in 2016. SMU is working towards a target of 100 PMET placements per year and will incorporate more digitalisation relevant modules for future runs.
IE Singapore and Ngee Ann Polytechnic signed an MOU at the ITM launch to jointly develop a Diploma programme in International Trade & Business. The first wholesale trade-related diploma programme in Singapore, it will incorporate modules on digital business solutions and analytics. The first intake, estimated to enrol 120 students, will begin in April 2018.
 Roadmaps are being developed for 23 industries to address issues within each industry and deepen partnerships between Government, firms, industries, trade associations and chambers. The ITMs are grouped into 6 broad cluster: Manufacturing, Built environment, Trade & connectivity, Essential Domestic Services, Modern services and Lifestyle.
The article IE Singapore’s Industry Transformation Map for Wholesale Trade focuses on digital platforms and skill development first appeared on opengov.
SINGAPORE — The Supply Chain and Logistics Innovation Playground, a start-up incubator for logistics solutions, was launched yesterday by Dr Koh Poh Koon, Senior Minister of State (Ministry of Trade and Industry and Ministry of National Development).
The incubator at Supply Chain City is already home to 27 partners specialising in supply chain and logistics innovation solutions, noted Dr Koh. Close to half of these partners are start-ups, while the rest comprise shippers, logistics service providers, solution vendors, and academic and research institutions.
By bringing these partners together, the innovation hub seeks to generate more than S$50 million in business ventures over the next 18 months, he said. Over the same period, more than 20 collaborative projects targeted at small and medium-sized enterprises (SME) will be hosted at the incubator, involving 12 start-ups.
Dr Koh noted that the supply chain and logistics industry has undergone major transformation over the past few years. For Singapore to stay relevant, he said, there has to be a “collaborative ecosystem”, for large companies and start-ups alike, to develop and adopt innovative supply chain solutions.
“We are seeing local and global start-ups disrupt traditional practices through smart warehousing, smart trading and smart transportation. This trend of disruption and constructive transformation must continue,” he added.
State agencies Spring Singapore and Workforce Singapore have committed S$2.8 million to help groom the next generation of start-ups and develop supply chain talent and capabilities in SMEs through the incubator. The Startup SG Accelerator scheme managed by Spring Singapore will support start-ups in piloting solutions for the logistics industry.
With the logistics industry in Singapore expected to generate more than 2,000 jobs for professionals, managers, executives and technicians by 2020, the incubator aims to support the development and adoption of innovative technologies for the logistics sector. These include warehouse technology, autonomous guided vehicles and digital technology.
Through the programme, start-ups can access supply chain expertise, client networks and potential investors, as well as share knowledge and resources with partners.
One of these start-ups is Cosmiqo International, a supply chain and operational analytics company specialising in sectors such as logistics and manufacturing. Through the incubator network, Cosmiqo partnered Infolog and the National University of Singapore to develop and pilot autonomous robots that can help improve picking processes in warehouses and enhance productivity.
The Professional Conversion Programme for e-commerce supply chain professionals will help develop a pipeline of local professionals to support the growing e-commerce sector and train up to 60 mid-career individuals over the next two years.
It will tap on the expertise of local e-commerce retailers such as Reebonz to offer training in merchandising, sourcing, procurement and account management.
The post Supply chain incubator aims for S$50m in new ventures in 18 months appeared first on TODAYonline.
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.
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.
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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.”
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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