At Nordea Bank, digital innovation means becoming more relevant to our customers. We’ve made good progress in this as a founding partner of the we.trade trade finance consortium.
Powered by blockchain technology, we.trade connects buyers and sellers in a trusted, efficient digital ecosystem that streamlines trade across Europe’s borders. Transaction volume has grown quickly since we.trade went live in 2018, empowering businesses large and small to capitalize on international trade.
Overcoming the payments catch-22
International trading is in the DNA of almost every Nordic company. At Nordea, the largest financial services group in the region, our mission is to provide services that make trade easier, particularly for small and midsize enterprises (SMEs) that need help the most. Several issues, however, prevent many from taking the plunge.
First there’s the catch-22. Should the buyer send payment before receiving the goods, or should the seller ship the goods before receiving payment? Doing business with unknown parties creates counterparty risk that few SMEs can afford.
Maybe both should arrange a letter of credit before starting a trade. But negotiating across borders and languages with the banks in the middle can be slow and costly, especially when using manual, paper-based processes.
Then there are legal, regulatory and currency complexities to sort out. The cross-border friction is so onerous that many SMEs avoid trading altogether.
A trusted we.trade environment
To improve trade processes, Nordea joined we.trade in 2017 with 11 other large European banks and IBM Services. We collaborated to develop a digital platform that connects buyers and sellers in a seamless and secure trading environment.
What factors lie behind we.trade’s success? First is the strength of the consortium. Major banks contributed their trading knowledge and best practices, setting a strong foundation for simplifying trade. IBM, with its global reach, industry expertise and relationships with key trading partners, helped us move quickly.
On the technical side, software developers at IBM had the focus and persistence to accelerate our project. They also are expert in the Hyperledger Fabric hosted by The Linux Foundation, critical to we.trade because it removes trading uncertainty.
Blockchain distributed ledger technology (DLT) creates a traceable record of transactions transparent to all parties, while smart contracts can trigger payments when the seller meets settlement conditions. And since every business in the we.trade network has been verified by its bank, traders are assured of trustworthy partners. With just a few clicks, they can locate traders throughout Europe without fear of counterparty risk.
Our developers also spent considerable effort coding legal, regulatory, multilingual and currency requirements into the platform. This gives SMEs confidence by removing administrative barriers to trade.
A vision for prosperity — a complete trade marketplace
Although we.trade started as a trade finance platform, a lightbulb moment gave us a bigger idea. We’re adding new banks, of course, but also logistics companies, insurers and other service providers. As the roster fills out, we’ll have the payments, financing, supply chain and insurance capabilities, and ecommerce services for a complete trade marketplace.
One-stop access to new business partners is likely to stimulate trade in a way that benefits Nordea’s customers and society alike. In our vision, the we.trade solution fosters trade … trade that will foster prosperity.
From time to time, we invite industry thought leaders, academic experts and partners, to share their opinions and insights on current trends in blockchain to the Blockchain Pulse blog. While the opinions in these blog posts are their own, and do not necessarily reflect the views of IBM, this blog strives to welcome all points of view to the conversation.
The use of open source code is on the rise. Red Hat’s 2021 Enterprise Open Source Report found that 90% of companies use open source code and 79% of IT leaders expect their business use of open source to increase. Also on the rise, unfortunately, is malware and ransomware up 158% in 2020 according to […]
Distributed ledger technology (DLT) has gone beyond its experimental phase and is now actively managing several enterprise workflows around the world in areas like trade logistics, export finance, inter-bank payments, and regulatory compliance. But this has not led to convergence, either to a default technology stack or to a single global network that everyone runs […]
Before cryptocurrencies, blockchain technology was unknown to most people. It was blockchain’s unique ability to manage the ownership of (virtual) currency in a decentralized and reduced-risk manner that made all the difference. The introduction of permissioned blockchains made the same functionality even more appealing to the enterprise world in the context of decentralized business asset […]