Africa was at the forefront of technological change this week as Barclays Africa and its UK parent company completed the world’s first trade finance transaction using blockchain technology.
The trade, between Ireland and the Seychelles, was based on a new technology platform developed by Wave, a start-up that went through the Barclays Accelerator programme powered by TechStars in New York last year.
While companies around the world are looking for ways to improve trade finance transactions using the speed and security offered by blockchain technology, this is the first time it has been achieved in a live trade. Because of the involvement of Barclays Africa, additional pilot projects involving African clients are likely as the technology is developed and adapted.
The pilot trade involved a letter of credit transaction between Seychelles Trading Company and Ornua (formerly the Irish Dairy Board), clients of Barclays Africa and Barclays UK respectively. It used the Wave technology platform to transfer the electronic bill of lading, with the funds sent via Swift.
The Wave application allows all stakeholders on the supply chain to send, receive and track an electronic bill of lading as well as upload and send related documentation. The application is linked to a distributed ledger which securely records and verifies the ownership and authenticity of the documents. This eliminates many of the current inefficiencies in international trade.
The Global Alliance for Trade Facilitation estimates that “7% of the global value of trade is absorbed by the cost of documents alone”, which means companies around the world stand to save significant costs and time, with the shipping industry and financial institutions expected to be some of the biggest beneficiaries.
George Wilson, head of Africa Trade Financial Institutions, comments: “While trade finance is ripe for innovation, it has been a difficult area to digitise because every unique trade involves numerous parties – importers, exporters and banks at either end, shipping carriers and customs officials – and they all have to be supportive and comfortable with the technology.”
Barclays Africa project manager for the pilot, Kelly Parkhurst, says the successful Seychelles pilot trade would accelerate interest in the Wave technology.
“The Wave application is simple to use, and their team has a long-term vision and strategy that sets them apart from other start-ups playing in this field,” she says.
Given the speed of technological advances and the global interest in the Wave product, a full commercial rollout of the application might happen sooner than originally anticipated. The key to adoption is in an agile and highly collaborative approach, says Parkhurst.
James Scott, head of digital at Corporate and Investment Banking for Barclays Africa, says the successful pilot trade was an example of the technological advances taking place across Africa.
“We have been taking a leading role in helping to develop products and investigate technologies that will bring efficiencies and cost savings to Africa. This includes blockchain, which has the potential to fundamentally change the way certain businesses operate.
“Barclays Africa was the first African bank to join the R3 Blockchain consortium, which includes some of the world’s biggest financial institutions investigating the uses of blockchain technology. We nominated our Seychelles client for this first pilot and could involve other African trade finance clients, and other banks with clients in Africa, in future tests.”
Temi Ofong, chief executive: Corporate and Investment Banking Africa (excluding South Africa) and head of Global Finance and Transactional Banking at Barclays Africa, says Africa continually provides examples of new technology leapfrogging over existing and often outdated systems.
“This technology solves a lot of issues for everyone involved in trade finance. It reduces risks such as fraud, it prevents forgeries of documents, and it eliminates a huge amount of paper work. Importantly, it saves a lot of time – typically these documents take anywhere from 2 to 10 working days to be couriered from party to party. Now it can be done electronically in hours or minutes, depending on the back end processing.”
Both Seychelles Trading Company and Ornua were excited about the change the Wave application could bring to the trade industry. Veronique Laport, CEO of Seychelles Trading Company, says: “The allure of Wave is in its simplicity. It’s easy to operate and simply reduce paper based transactions in the international trade. An industry wide roll out of such an application will greatly benefit any Company dealing with imports or exports.”
David O’Rourke, group trade finance manager at Ornua Co-operative, adds: “Moving to paperless trade would be hugely beneficial in supporting the supply chain, through reduced costs, error free documentation, and fast transfer of original documents to our customers worldwide.”
Gadi Ruschin, CEO of Wave, comments: “Effective use of blockchain technology really can have a huge impact on the future of trade. By adopting our system, trade can be done more easily and more cheaply while providing a simple and friendly user experience without changing existing workflows. “