Commerzbank, LBBW pilot trade finance on Marco Polo blockchain

Thursday 28 March 2019 13:12 CET | News

German banks LBBW and Commerzbank have announced the completion of their first pilots on the Marco Polo trade finance blockchain network.

The data transfer for transactions between engineering technology company Voith and pump and valve manufacturer KSB SE were carried out digitally.

Marco Polo is one of the large international trade finance networks based on R3’s Corda blockchain technology with TradeIX as the technology provider and network operator. The network has 17 member banks with Commerzbank joining at the very beginning and LBBW in 2018.

There were two trade finance aspects for this pilot, a payment commitment from the buyer’s bank and trade finance by the supplier’s bank.

The parties agreed on order and delivery details via the Marco Polo network as well as a conditional payment commitment from the buyer’s bank. The condition was that the goods were delivered to the buyer’s satisfaction. Hence once the delivery details were entered, they were automatically matched with the agreed conditions triggering an irrevocable payment obligation similar to a bank guarantee from the buyer’s bank.

In addition to the certainty of payment, the supplier’s bank also provided financing using the Marco Polo network.

In one of the transactions hydraulic couplings were sent from Germany to China and in the other pumps were delivered within Germany.

The key benefit of the network is to automate much of the process by reducing reliance on labour-intensive paperwork.

Future tests will involve ERP integration with customer systems, so the data is pulled directly from their back office functions. There are also plans for integration with transport and insurance providers.

Commerzbank is also working with the German innovation group Fraunhofer IML to explore the future of exports and trade finance. Earlier this year it executed two money market tests, one with Deutsche Börse and another with Siemens and Continental. Last year it also tested foreign exchange transactions and took part in the Spanish stock market (BME) warrants test.

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Keywords: Commerzbank, LBBW, trade finance, Marco Polo, blockchain, payments , financing
Countries: World