The first blockchain-based trade finance platform is on the way

At the end of 2017, Nordea announced that it would join the we.trade consortium as a founding partner. The consortium is, in conjunction with IBM, developing a platform based on distributed ledger technology (DLT) that aims at making domestic and cross-border commerce easier, safer and more efficient for companies. It is the first such blockchain-based trade finance platform, marking a milestone in the practical adoption of DLT in the financial industry.

A significant step forward in Blockchain/DLT adoption

Nordea joins Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societé Generale and UniCredit as a founder of we.trade, which will simplify trade finance processes for SMEs mainly. Larger companies have documentary credit (D/C) and tailor made guarantees as tools to reduce their risks, while these are not always appropriate for the SME segment. However, large companies that favour open account solutions may also find we.trade a good solution.

Ville Sointu, Head of DLT & Blockchain at Nordea, explains the significance: “In the current broad landscape of blockchain technology based initiatives in trade finance we see we.trade as a standout in its focus and realistic execution strategy. We’re looking forward to providing a Nordic perspective to the future of trade finance.”

Unique customer benefits

Nordea plans to roll out the we.trade platform to its customers across the Nordics and is the first bank in the region to deliver a customer-facing trade solution based on DLT.

“We look forward to delivering its benefits to our customers. It promises to simplify trade finance processes for SMEs by addressing the challenge of managing, tracking and securing domestic and international trade transactions,” says Patrik Zekkar, head of Trade & Working Capital Management Sales at Nordea.

With we.trade, SME customers will secure and accelerate the order-to-settlement process, as it is quicker than the traditional exchange of documents, and with the required traceability. The platform’s end-to-end transparency will give SMEs confidence to initiate trade with new partners in their home market or internationally.

Market launch expected in the first half of 2018

The commercialisation of the platform is anticipated in Q2 2018, while it is expected that test customers of the founding banks will use the platform earlier.

we.trade is a collaborative open banking initiative – so it is not a closed group of nine banks, who as first movers are grabbing market share. Rather, we.trade is open for all banks to join in order to create standardisation, collaboration and consensus across banks to support trade. Banks that join are not asked to contribute to the building of the platform – rather the solution is accessible for them to use. SMEs who want to use the platform need to be customers of the banks involved, due to the need to perform KYC.

How does we.trade work?

We.trade uses both distributed ledger technology (DLT) and smart contracts: it links the parties involved in trade (the buyer, buyer’s bank, seller, seller’s bank and in a later stage also the transporter) and registers the entire trade process, from order to payment, displaying it in an at-a-glance, user-friendly interface, and guaranteeing automatic payment when all contractual agreements have been met. The platform is fully automated and available 24/7, making the order-to-payments process quicker than the traditional exchange of documents.

For the companies, in addition to real-time tracking and tracing of where their shipment is and conditional settlement through the banking system, a chief benefit is the ability to identify any known counterparts in their supply chains.

For an introduction to how the we.trade platform (formerly known as Digital Trade Chain platform) works watch this movie:

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