While open account trade finance gained market share for many years, there was a turnaround in 2019 that saw a 6% growth in documentary trade finance revenues, which include Letters of Credit (LC), according to a BCG/ICC report.
SMBC said it was joining the networks to improve efficiency in trade. It also highlighted staff working remotely as a result of COVID-19, which caused issues with the complex exchange of documents required for Letters of Credit. Because of these sorts of challenges, COVID-19 has triggered a ramp up the digitization of trade around the world.
The Japanese bank has already trialed the Marco Polo open account blockchain platform. Plus, it signed a deal with Japan’s SBI to explore taking 14% stake SBI R3 Japan, the joint venture to roll out R3’s enterprise blockchain technology in the country.
Swiss startup komgo, which focuses on commodities trade finance, initially oil, has been in production for more than 18 months. It had 15 founding members, including numerous global banks, oil majors and commodity traders. More recently, ConsenSys and Total invested, but SMBC is not a shareholder.
Letter of Credit network Contour, formerly known as Voltron, incorporated six months ago with seven bank shareholders. Since then it has added Citi, Singapore’s DBS Bank and Vietnam’s HDBank as members. The solution is currently in beta testing phase.
Marco Polo and Contour use R3’s technology, but komgo uses the Quorum flavor of Ethereum.
These are important wins for komgo and Contour. Despite the increasing trend to digitization, the we.trade blockchain network had to lay off staff to adapt to restricted funding options. In particular, the availability of trade finance insurance has contracted, resulting in several national export credit agencies stepping in to provide guarantees.
Update: We added confirmation that SMBC is not a shareholder in komgo.