by Giulio Prisco, Oct 05, 2017

R3 and TradeIX Develop Blockchain Solution for Open Account Trade Finance


R3 and TradeIX are developing an end-to-end open account trade finance business network, with the collaboration of twelve high-profile financial institutions: Bangkok Bank, Barclays, BBVA, Bladex, BNP Paribas, Commerzbank, CTBC Bank, ING, Intesa Sanpaolo, Shinhan Bank, Royal Bank of Scotland and Wells Fargo.

"This project represents a big step for the trade finance industry,” David Sutter, the head of platform strategy at TradeIX, said. “Cutting-edge technology coupled with a strong spirit of collaboration amongst many of the world's leading trade banks, corporates and technology providers is helping to make trade finance simpler, less risky and more inclusive as well as connecting the ecosystem of banks, buyers, suppliers, technology providers, insurers and others critical to facilitating global open-account trade flows."

An open account trade flow means that goods are delivered before payment is due. Obviously, open account transactions are advantageous for buyers, but risky for sellers, who often need trade financing before embarking on a deal. The new initiative of TradeIX and R3 seems to represent a promising way to better organize the sector with streamlined operations, with a potential to enable flexible and efficient working capital finance solutions for the clients of the financial operators involved in the project.

"For the first time in history, we have both the opportunity and the tools needed to transform and rewire the world’s global trade finance infrastructure,” added Sutter. “In doing so, we can make fundamental improvements to the benefit of the entire trade ecosystem.”

TradeIX administers the TIX Platform, an open platform providing applications, technology tools and core infrastructure for the trade finance ecosystem. R3 provides Corda, a distributed ledger platform designed specifically for financial services. These two platforms will power the new trade finance business network.

The R3 press release explained that, with this new initiative, financial institutions will be able to automate pre- and post-shipment financing and risk mitigation for corporate buyers and sellers around the world. Standard trade finance smart contracts on a distributed ledger infrastructure will provide secure and automated financing of supply chains using a single record for critical trade data including identities, purchase orders, invoices, shipping and logistics information, trade assets, financing activity, credit risk and more.

“Earlier this year R3, TradeIX and a core group of R3 members teamed up to redesign the infrastructure behind open account trade finance utilizing our Corda platform and the TIX Platform of TradeIX,” David Rutter, CEO of R3, said. “Existing trade finance infrastructure is in serious need of an upgrade, and this project is a big step toward the adoption of reliable, efficient and standardized processes for the entire sector.”