R3 and TradeIX develop open account trade finance DLT business network

Enterprise software firm R3 and trade finance technology firm TradeIX are working on a project that will overhaul open account trade finance infrastructure.

The initiative is a joint undertaking between R3, TradeIX, and twelve financial institutions including Bangkok Bank, Barclays, BBVA, Bladex, BNP Paribas, Commerzbank, CTBC Bank, ING, Intesa Sanpaolo, Shinhan Bank, Royal Bank of Scotland and Wells Fargo.

R3, TradeIX and the participating banks are developing an end-to-end open account trade finance business network which will be powered by TradeIX and R3's Corda distributed ledger platform. The prototype will be customised to meet the needs of participants across multiple geographies, supporting the continued growth of open account trade whilst making it safer and simpler.

An open account transaction means that the goods are shipped and delivered before payment is due, usually in 30 to 90 days. Obviously, this is the most advantageous option to the importer in cash flow and cost terms, but it is consequently the highest risk option for an exporter.

This initiative includes a suite of trade specific APIs and technology tools, a rules engine, and an open, standard core infrastructure for trade data, contracts and transactions, said a statement.

Financial institutions will be able to automate pre- and post-shipment financing and risk mitigation for corporate buyers and sellers around the world. In turn, corporate buyers and sellers gain access to API-driven technology solutions that help simplify trade, improve visibility into trade flows, and provide access to much-needed credit and risk mitigation services at critical points in the trade lifecycle. This infrastructure is designed to integrate with existing platforms as well as R3 and other ecosystems.

The business network will include banks, buyers, suppliers, technology providers, insurers and other parties, such as logistics companies, that are critical to facilitating global open account trade flows.

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

Rob Barnes, CEO of TradeIX, said: "The business network provides the entire trade ecosystem with a smarter, more secure, and more transparent infrastructure that connects currently siloed parties and systems, standardizes and digitises trade documents, data, and assets enables the convergence of trade data from physical, informational, and financial supply chains. This provides trading parties secure, easy access to rich, verified trade data, APIs, and powerful technology applications that will drive a paradigm shift in open-account trade finance."

Ivar Wiersma, Head of Innovation Wholesale Banking at ING, added: "In order to address emerging needs in trade finance, ING, R3 and other key members have come together to launch this initiative for open-account trade finance which enables flexible and efficient working capital finance solutions for our clients. As a member of R3 it is very rewarding to be part of this ground-breaking initiative."

R3 also announced that the International Trade and Forfaiting Association (ITFA) is joining the R3 network and will be involved in this project and others. ITFA is a global association for the trade receivables and supply chain finance industry with over 170 members.

Sean Edwards, chairman of ITFA, said: "We look forward to working with R3 and its members as an observer and adviser on this project as distributed ledger technology looks to change the way that world trade, and particularly receivables finance, is conducted. The digitisation of traditional trade payment instruments is a key step in modernising trade finance."