Bank of Montreal (BMO), CaixaBank, Commerzbank and Erste Group have joined an initiative by UBS and IBM to build a new global trade platform based on blockchain technology.
The new platform, called Batavia, is built to be openly accessed by organisations of all sizes anywhere in the world, and can support trade finance for transactions across all modes of trade, whether goods are being transported by air, land or sea.
Batavia advances the work initiated by UBS and IBM last year to develop a trade finance platform built on the IBM Blockchain Platform powered by the Hyperledger Fabric Blockchain framework.
The development work is being done collaboratively by the five banks and IBM in consultation with transportation industry experts as well as the banks’ customers to ensure that the platform is flexible and intuitive for customers and can be commercialised.
Batavia is targeting pilot transactions with customers on the network in early 2018 to test and refine the platform.
Designed to support more efficient, transparent and cost effective transactions, the new global trade financing platform will help organizations more easily build multi-party, cross-border trading networks worldwide.
Batavia will allow transacting parties to view the progress of a shipment as it leaves the warehouse, is loaded on to a plane, truck or boat and arrives at the receiving port, automatically releasing payments incrementally along each step of the process.
The platform will help connect participants in a trading network, delivering the potential to transform global trade. The open nature of the platform, which encourages broad participation by many banks, vendors and regulators, will also help open new trade corridors, bring new players into the market and expedite processes that before were prohibitively time-consuming and expensive.
Traditionally, trading partners, including buyers, sellers, their banks, transporters, inspectors and regulators have relied on large volumes of paper based documentation to securely conduct trade transactions.
This process can take up to weeks, incurring costs, making data vulnerable to errors due to repeated manual reprocessing and tying up capital. Delays and lack of transparency in trade can make it difficult for companies to access financing, limiting their ability to trade across borders and grow revenues. The Batavia platform will eliminate the necessity to handle and compare documents, allowing buyers, sellers and their banks to execute transactions with a high degree of efficiency and transparency.
Blockchain enables greater transparency by digitising agreements entered into a permanent, immutable ledger that all involved parties in a trade transaction can view. The status of a contract until its fulfilment is updated automatically through IoT sensor data or user input. Batavia will save users time and reduce costs by ensuring the integrity of data as it changes hands, reducing third-party verification processes and minimising the potential for errors, tampering or disputes. When all participants in a transaction can access a shared version of the truth, they can interact with greater trust, building larger and more distributed networks, and in turn, growing revenue.
“BMO takes great pride in being a leader in trade and supply chain finance innovation. Our objective is to deliver simple and efficient solutions founded on technology that delivers cost, efficiency and risk benefits to our clients and the bank,” says Jeffrey Shell, MD and head of global trade and banking at BMO. “We are very excited to participate in this initiative and sense the development of real, positive outcomes for our clients in North America and around the world. As a partner in Batavia we are strengthening our ability to remain highly relevant to our clients as the financial services industry continues to evolve.”
Jordi Fontanals, CaixaBank chief operating officer, says: “At CaixaBank we operate a fully customer-centric innovation model, using technology and creating original products to support individuals and businesses alike. Harnessing blockchain technology offers enormous potential for driving digitization, but more importantly it paves the way for international projects in collaboration with multiple partners, with these being created and designed to serve our customers. Batavia is a prime example of this, allowing us to bolster the foreign trade services that CaixaBank provides to its clients with commercial operations around the world.”
Bernd Laber, group executive: trade finance and cash management at Commerzbank AG, says: “Commerzbank processes around 30% of German foreign trade and a significant share of European foreign trade activities. As a strong partner for international trade finance, we assist our clients with premium solutions as well as in mitigating risks. With this collaboration and the envisaged platform, we strive to be at the forefront of exploring modern technology in the digital transformation of international trade finance processes.”
“Erste Group is committed to implementing innovations that provide our clients with greater transparency, efficiency and utility in the pursuit of their business and financial interests. By transforming the processes in international trade financing, the Batavia platform promises to boost foreign trade, thus also strengthening a key prosperity-promoting pillar of the economies in our region, Central and Eastern Europe,” says Patrick Götz, head of corporate flow products at Vienna-based Erste Group Bank AG.
Fabio Keller, IBM project lead, adds: “In working with hundreds of clients to implement blockchain solutions, financing global trade has emerged as one of the use cases most in need of innovating. Targeting the creation of large, global, multi-modal networks that bring transparency and trust to each step of the trade process is what makes Batavia a platform with so much potential to transform the way companies around the world do business with one another.”
“Today, the process of securing and financing trade is highly cumbersome for corporates,” says Beat Bannwart, head strategic innovation and market development: corporate and institutional clients at UBS. “Through working closely with our clients, we aim to innovate their user experience through a simple, digital and automated way of arranging, securing and financing their international trade transactions by leveraging new technology and creating an open ecosystem.”