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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).
From Global Trade Review (GTR) | By Sanne Wass
Fintech firm TradeIX will look to accelerate the growth of the Marco Polo blockchain project, after receiving a US$16mn investment from ING and other financial players.
TradeIX is the world’s first trade finance specific open-source blockchain platform, which allows financial institutions to develop their own trade finance applications with open APIs.
The company announced last week that it had closed a series A funding round led by ING Ventures, the venture capital arm of ING, and joined by BNP Paribas, Kistefos and Tech Mahindra.
In a statement, TradeIX CEO and founder Rob Barnes calls the investment “a significant stepping stone” for the company, adding that the cash injection will be used to boost hiring, accelerate customer acquisition and platform development.
One of TradeIX’s flagship projects is Marco Polo, a platform for open account trade developed with R3 and 10 international banks, including ING and BNP Paribas.
Powered by R3’s Corda, it enables real-time connectivity between trade participants, improves visibility into trade flows and simplifies access to credit and risk mitigation services throughout the trade lifecycle.
Daniel Cotti, CFO at TradeIX, tells GTR that pilots are currently being prepared and are scheduled to begin in October. The platform will then move into production and be commercialised next year.
He says the funding round will allow TradeIX to “accelerate resources to the Marco Polo project to ensure that we maximise the potential of the industry initiative with additional trade orchestrations”, also adding that the firm will be “growing the Marco Polo ecosystem aggressively”.
The banks involved in the project at this point are Bangkok Bank, BNP Paribas, Commerzbank, DNB, ING, OP Financial Group, RBS, SMBC and Standard Chartered, with Natixis being the latest to join in late May.
Two other banks are “about to sign”, according to Cotti, who could not publicly reveal the names, but added that “we are talking to many other interested banks”.
A number of other financial institutions, including Barclays, BBVA, Bladex and Wells Fargo, were part of the original consortium developing the proof of concept, but decided to leave the project as it entered its pilot phase.
“We needed the banks to help us pay for this,” Cotti explains. “And some of the banks had too many other projects or didn’t have the budget, or weren’t able to present a business case internally that was approved.”
ING and BNP Paribas, together with Commerzbank, were the core banks driving the proof of concept throughout the second half of 2017.
With ING’s investment, the bank is now “intensifying our co-operation with TradeIX”, says Mark Buitenhek, the bank’s head of transaction services. He emphasises that while ING sees “a lot of opportunity in distributed ledger technology”, it is TradeIX’s open platform that makes it appealing.
“‘Open’ is what ING thinks the future of financial services is going to be,” he adds.
According to Benoit Legrand, chief innovation officer of ING and CEO of ING Ventures, the investment means the bank can offer TradeIX’s solution to “even more clients in the near future”.
The announcement comes just a few weeks after another blockchain consortium announced it is going into production with a similar blockchain solution. The we.trade platform is powered by Hyperledger Fabric and is developed by nine European banks together with IBM.
Speaking at the Money2020 fintech conference in Amsterdam in early-June, Joost Volker, lead product manager of trade at Rabobank, said we.trade is “now in a production environment” and will host its first transactions later in the same month. He added that the consortium will “use the period after summer for a large roll-out” to the broader market.
While there are technical differences between the Hyperledger Fabric and Corda blockchain frameworks, we.trade is, like Marco Polo, a solution for tracking and financing open account trade. However, we.trade is mainly focused on SMEs trading within Europe, whereas Marco Polo will be a global platform for all types of clients.
The post TradeIX to “aggressively” grow blockchain ecosystem after ING investment appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr Bermingham
Electronic certificates of origin (eCOs) will be issued on the blockchain in Kenya, in a move that will modernise a key part of the country’s trade facilitation processes.
Fintech company vCargo Cloud (VCC) is to work with the Kenya National Chamber of Commerce and Industry (KNCCI) to implement a blockchain-based solution that it launched in May in Singapore.
eCOs are export documents that certify the country of manufacture of a shipment. They are required by customs, banks and traders to verify goods and are commonly among the documents used in a trade finance transaction.
The solution allows for the instant, digital capture and processing of eCOs. They will be embedded on the blockchain and stored in a private ledger, where customs, banks or any other parties to the trade cycle can access them.
VCC CEO Desmond Tay tells GTR that the solution will be tweaked slightly to the specifications of the KNCCI, but that it is essentially the same as the one being used in Singapore.
“After the success in Singapore, we have been trying to bring the blockchain eCO solution to other places around the world. We are in discussions with a few chambers in Africa and Southeast Asia and expect to see further expansion soon,” he says.
VCC has an office in Nairobi, and so launching in Kenya was a logical next step, Tay says. The company is also in talks with chambers in Sri Lanka, Japan, Myanmar, as well as numerous countries in East Africa about rolling out the platform there.
Numerous other companies have begun launching blockchain-based solutions for trade in Africa. IBM is rolling out a supply chain finance platform that uses machine learning and blockchain to extend micro-loans to small businesses there.
Meanwhile, Block Commodities and Wala, a trader and a fintech platform respectively, have combined to launch a cryptocurrency commodity financing solution, providing US$10mn-worth of loans to 50,000 smallholder farmers in Africa.
The post Blockchain-based certificates of origin come to Kenya appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr Bermingham
HSBC and ING have conducted their first live, commercial trade finance transaction on blockchain, for agrifood trading giant Cargill.
The deal was completed using the R3 Corda platform, with a cargo of soybeans exported from Argentina to Malaysia.
Cargill was the exporter and importer on a deal that saw Cargill Geneva selling soybeans on behalf of Cargill Argentina, and Cargill Singapore buying the goods on behalf of Cargill Malaysia.
It was done using the letter of credit (LC) module of Corda, which has been developed by 12 banks. This enabled the transaction time to be reduced from a standard five to 10 days, to 24 hours. The LC was issued by HSBC, with ING acting as the advising bank. The value of the transaction has not been disclosed.
While the LC was executed on blockchain, other elements of the transaction cycle – such as the bill of lading – were not.
Vivek Ramachandran, HSBC’s global head of innovation and growth for commercial banking, tells GTR that we can expect to see another few live transactions on this platform, as the bank learns how it interacts with the systems of other banks and corporations. However, the primary focus now will be on driving industry-wide adoption.
“We’ve still got a few more steps to do before we get to widespread adoption,” Ramachandran says. “A lot of people have been wanting to make sure that it works with a live transaction. That’s part of the reason this is exciting, to be able to demonstrate that a live commercial transaction with a flagship global trader and two global banks on each side of the transaction, actually works.”
While this is arguably the most advanced trade finance development on blockchain to date, the industry has a couple of years-long history of trialling the technology, with the hype at times reaching deafening levels.
In late-2016, Commonwealth Bank of Australia and Wells Fargo closed a US$35,000 transaction for two subsidiaries of Brighann Cotton, taking 88 bales of cotton from Texas in the US to Qingdao in China, using Skuchain’s Brackets blockchain-based solution.
Since then there have been a plethora of pilots, trials and proofs of concepts, but general frustration in the industry that nobody is bringing blockchain technology to operational trade finance. There have been signs over recent months, however, that this is getting closer.
Batavia, a blockchain-based trade finance platform developed by IBM and a consortium of five banks, completed its first live transactions with corporate clients in April and is thought to be close to commercial use.
we.trade, a European platform for managing, tracking and protecting trade transactions between SMEs, backed by nine banks, is aiming to launch to business clients in the third quarter of 2018.
In India last month, meanwhile, a government-backed invoice financing platform went live with a blockchain-based solution that allowed the various companies involved to share information to prevent double financing via blockchain. However, there is no financing element to this product.
The news comes two months after HSBC’s senior innovation manager, Joshua Kroeker, told GTR that the bank was ready to do live trade finance transactions on blockchain.
The bank had been involved in one of the earlier blockchain projects for trade finance when it worked with Bank of America Merrill Lynch and the Infocomm Development Authority of Singapore (IDA) on a proof of concept to mirror letters of credit using distributed ledger technology.
However, its work on the Corda platform has apparently accelerated beyond its other blockchain developments.
Corda is a platform owned by R3, a US company founded by David Rutter, with members including more than 200 banks, financial institutions, regulators, trade associations, professional services firms and technology companies.
In April, an application for syndicated loans called Fusion LenderComm became the first to go live on the Corda platform. The app had been piloted by banks including BNP Paribas, BNY Mellon, HSBC, ING, Natixis and State Street. It had been developed since early-2017 by fintech company Finastra and R3.
ING has also been heavily involved in the trade-based developments on blockchain technology. As well as being among the banks working with Fusion LenderComm, it was reported to be working with trading house Mercuria and French bank Société Générale to build a blockchain solution for oil trading, early in 2017.
The bank’s managing director for innovation in wholesale banking, Ivar Wiersman, says: “It’s exciting to see this transaction has been completed successfully with clear client benefits in speed and ease in execution.”
The post HSBC and ING complete live trade finance transaction on blockchain appeared first on Global Trade Review (GTR).
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).