After being stagnant for a long time, the global trade finance industry has been on the receiving end of efforts to innovate through new technologies and development. Several of these efforts are based on the use of blockchain, a type of shared, distributed ledger on which the history of transactions is digitally recorded and cryptographically secured. Within trade finance, the technology is seen is as a way to streamline the transfer of money and goods by facilitating greater transparency among participants and increase efficiency.
There are several trade finance solutions in development right now, but I will use this opportunity to discuss one I have had personal experience with since day one: Batavia.
What is Batavia?
Batavia is a global trade finance platform based on blockchain and built on the IBM Blockchain Platform. It is being collaboratively developed by a consortium of five banks — UBS, Bank of Montreal (BMO), CaixaBank, Commerzbank and Erste Group — and IBM as equal member to the banks, in consultation with transportation industry experts and the banks’ customers. The consortium aims to support the creation of multi-party, cross-border trading networks by establishing Batavia as an open ecosystem that can be accessed by organizations big and small around the world.
Proving this isn’t just talk, corporate clients have now successfully completed the first live pilot transactions on the Batavia platform. These were conducted with a variety of transportation modes, across different geographies and with trading parties of various sizes to demonstrate Batavia’s ability to scale and manage diverse transactions. Cars were traded from Germany to Spain and raw textiles for furniture production were traded from Austria to Spain. By executing their trade agreements through Batavia, the parties involved were able to avoid the types of errors that are caused by a lack of transparency.
How does Batavia rewire the trade finance process?
Though documents related to bills and letter of credits are now maintained electronically thanks to digital transformation, they are not always accessible to all the parties involved in the trade. And for a trade to be completed, buyers, sellers, their banks, transporters, inspectors, regulators and more must all pass off on it. Batavia helps to simplify the end-to-end process of a trade by providing a digital and automated way of arranging, securing and financing international trade transactions. Because this trade finance platform is built on blockchain, there is a single, distributed version of all documentation that is shared across the involved participants of such trade. That means everyone has the information they need to do their due diligence and complete the transaction and sees therefore the same truth like all other involved parties. This includes the closing of trade agreements and the execution of smart payments. And by “smart,” I mean the payments is automatically triggered by specified events in the supply chain and immutably recorded to the blockchain.
What’s next for Batavia?
Batavia is a platform with much potential to transform the client experience by bringing transparency and trust to each step of the trade process. Now that a minimum viable product has been developed and initial pilot transactions with clients have been completed successfully, the consortium plans to focus on building out a production-ready solution.
On an increasing number of trading floors, new sections are popping up. Past the commodities, foreign exchange, and futures desks, you might see a digital assets trading desk — the “crypto desk.” A few early players have had 9-to-5 crypto desks since 2015; others built 24/7 desks; still others are examining whether to start a […]
Why do I need a bank account to hold, manage or spend money? I really shouldn’t have to pay fees and service charges, especially since my money — everyone’s money — is the gas in the bank’s lending engine. But if I don’t have a bank account, how do I pay my bills? I often […]
One of the best things about working at IBM — and in the RegTech field in particular — is meeting daily with the engineers and developers who are driving technological innovation in the financial industry. Consider, for example, the blockchain space. While blockchain’s decentralized, distributed-ledger technology is most popularly known as the basis for cryptocurrencies […]