Networking the networks
The first open-source blockchain-powered platform for trade finance – TradeIX’s founders claim it is a unique network-of-networks solution
A new fintech, whose leadership team includes PrimeRevenue founder Rob Barnes and former global head of trade finance at JPMorgan and ABN Amro Daniel Cotti, will formally launch this month what they describe as the world’s first open-source, blockchain-powered platform for trade finance – TradeIX.
Backed by private equity group Kistefos, TradeIX will be offering an API-driven platform including developer tools and core infrastructure that connects banks, alternative funders, B2B networks, corporate suppliers and buyers, credit insurers and technology providers, allowing them to finance trade and distribute trade finance assets.
Barnes and CTO Andrew Berti started a few years ago exploring the concept behind TradeIX and how distributed ledger technology could be deployed in trade finance.
Their vision was to create something that was “way more open” than the ‘destination’ applications currently facilitating trade finance and which at the same time could address issues related to the security and provenance of underlying transactions.
“Banks, B2B networks and corporates are all under pressure to connect to a lot of different participants within their eco-system,” Barnes says. “We thought that there just has to be a better way to do this.”
TradeIX is able to coordinate interactions between participants in that eco-system based on the rules of whichever party is leading a transaction.
The platform’s Composer tool – an orchestration engine that allows banks or other transaction leaders to write rules covering how they will interact with buyers or suppliers – means users can in theory deploy a receivables or supply chain finance programme in days or weeks rather than months, Barnes says.
“Composer basically tells the core platform, which is only accessible via blockchain or via APIs, how the orchestration has to happen, who the participants are,” he explains. “It will authenticate and verify those participants in a seamless manner.”
TradeIX uses blockchain technology based on the Linux Foundation’s Hyperledger Project and features openly available APIs that allow banks and other users to easily integrate with the platform. Would-be users can also trial the platform’s technology in a sandbox.
One of several deals that TradeIX will debut this year involves a corporate that wants to sell its invoices for working capital purposes and is seeking a multi-bank solution that meets its credit, pricing and jurisdictional requirements, Barnes told TXF. While the corporate does not want to implement and use several banks’ proprietary applications, banks also do not want to do due diligence and approve a new third-party provider for a single programme. The TradeIX (TIX) platform will allow all parties involved to connect with each other and share critical data in real time via a distributed ledger.
The corporate seller will post its receivables to the distributed ledger via an API. This data will then be accessed by different banks via TIX funder APIs. The rules and logic behind the transactions – such as settlement data, tenor limits and pricing – will be written into smart contracts that automatically execute the pre-defined business logic associated with the financing, he explains. The banks will then process and book the completed transactions using their back-office systems, which are connected to the distributed ledger and smart contracts. Once processed, data will be passed back to the corporate seller.
“We’re using technologies that a lot of the banks are moving towards,” Barnes says. “Some of them are not there yet, but we also have ways in which we can work with banks who have legacy issues.”
The emergence of the Payment Services Directive (PSD2) and e-invoicing in Europe is an opportunity for TradeIX to connect B2B networks focused on payments and e-invoicing to banks in a way that’s “really easy and scalable” and help them generate additional revenue streams, he says.
The platform will seek to leverage B2B networks’ entire client base plus the wealth of information they have on hand. Making that available to banks will allow them to fund in an environment that has greater visibility to the risks associated with underlying assets, Barnes says. “That’s really the gap that we’re finding.”
TradeIX is also in talks with a number of banks with a view to them using the platform for their own customers.
When working with banks, TradeIX will “step out of the way,” simply providing the infrastructure, rather than participating in the funding of any deal, Barnes stresses.
Transacting through the TIX platform will help banks generate new financeable assets while no longer needing to connect with numerous trade finance application providers. It will allow them to react to customer demands more quickly, cut processing and back-office costs, reduce risk and improve transparency, he says.
A network-of-networks solution
TradeIX will provide banks and other players with a ‘network-of-networks’ infrastructure that will help the trade finance industry shift into the blockchain arena, says Cotti, its CFO. “We help them connect in a much more seamless way and it takes all the operational frictions out of the process.”
“It’s really unique,” he adds. “We are not replicating what’s out there – we’re really creating something new.”
However, while “we are obviously disrupting what’s happening now, we are not taking anything away from anybody,” Cotti notes. “Banks continue to be responsible for their client relationships, credit decisions, funding and liquidity, and the buyer-seller interaction remains the same as it is now – to exchange purchase orders and documents. We just connect all parties.”
Barnes sees other emerging start-ups as potential competitors, although “if you look at the space right now, no one is providing what we’re providing.” While a number of fintechs are currently exploring how to orchestrate transactions using blockchain technology, “the difference is that our team is 100% focused on trade finance,” he says.
Currently headquartered in Northampton, UK, TradeIX plans to expand its 25-strong team fast to around 40 or 50 by early 2018 and to move into new locations. It has an office in London and will soon announce a new managing director to run its Irish entity out of Dublin. It will also build a physical presence in the US in the coming months and plans to launch an operation in Singapore in mid-2018.