Trading through we.trade

Developed by Nordea in a European-wide collaboration that now includes 11 other banks, (Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Santander, Societe Generale, UniCredit, CaixaBank, Erste Group and UBS) we.trade creates a platform that allows companies, from small and medium sized enterprises (SMEs) to large corporates, to make fast, easy, paperless and Know Your Customer (KYC) compliant trades. The aim of we.trade is to fully automate the trading process and seamlessly connect the entire trade ecosystem.

Go with the Flow

Flowrox is a family owned Finnish company that provides valves, pumps and spare parts as well as data and analytics, to the mining, chemical and energy industries. The company has operations on all continents and a turnover of around 40m EUR, employing 150 people in addition to running subsidiaries in the USA, Chile, South Africa, Australia, China and Russia. Through a network of 250 partners, Flowrox offers services worldwide. 80% of company turnover comes directly outside of Finland and 70% (of the remaining 20%) goes to OEM’s (Original Equipment Manufacturers) in Finland, who then export outside of Finland.

With a combined total of roughly 90% of turnover coming from outside of Finland, Flowrox were an ideal company to take part in the we.trade pilot.

“The we.trade platform creates trust in the system and reduces the Catch 22 that occurs at the beginning of a trade. Do I ship products before I receive payment or do I, as a buyer, pay before I receive the shipment? That was the kind of basic need we wanted to cover before building from there,” says Patrik Zekkar, Global Head of Trade & Working Capital Management at Nordea.

Finding the right transaction

At the beginning of the pilot project, Flowrox focused on finding a suitable counterparty to test a cross-border trade through the we.trade system.

Ismo Nironen, Head of Financing and Risk Management at Flowrox, explains: “We began preparing for the we.trade pilot already in Spring 2018 when we started to investigate possible customers with the right background to make a transaction. In the end it was actually rather easy to find one. I decided to take part because I’m interested in doing anything new, particularly the chance of leveraging new technology in one of the most important aspects of our business.”

One of the aims of we.trade is to simplify the trading process by allowing companies to find commercial counterparties, create trade proposals and purchase orders, request related services from their banks and set payment conditions, which can be agreed upon and executed in a secure space.

Ismo Nironen continues: “Having studied the material that explains the we.trade platform, I see this as a solution very well suited for smaller companies as it’s really convenient for them. After our initial work of getting the set-up in place, everything went really smoothly. In fact, I made the transaction while on summer vacation and at my summer cottage, and everything went well – even from there! I’m sure companies are really satisfied at being able to make trades literally from anywhere, regardless of location. It really makes trading easy and helps with the paperwork with the bank, streamlines the process and makes it easier.”

“I would recommend we.trade for smaller companies as I’m not sure how this will apply to large businesses. It will be very interesting to test we.trade with ‘normal’ deliveries where no letter of credit, bill of exchange, or bank guarantees are needed. Most definitely it will decrease the threshold for companies starting to export/import,” adds Ismo Nironen.

Saving time

With digitised and streamlined process, the opportunities for saving time are increased, at least in the actual trading part of the transaction. The ancient art of negotiating can still take some time though.

“Digitalising and streamlining the process saves time and is not dependent on location. However, the amount of time you save is dependent on the case; the transaction is quick, the lengthy part is getting a deal, which can often take 6 months. The counterparty risk decreases significantly, as the counterparty’s bank helps to divide the risk. From the buyer’s viewpoint they can confidently pay for the goods, without worrying about substantial bank guarantees.”

“The really big plus on both the buyer and seller side is that you can agree on more flexible payment terms. We are a small player which means that our projects are big for us but small for our customers. A 200k to 500k EUR order is big for us but can often be a routine daily order for them. It requires a lot of planning from our side while it’s just one paper amongst many for our counterparties. We ask for a 30% pre-payment and as large companies, our customers often don’t understand why. If they used a portal like this, it would make the process and making business quicker and would create more trust,” says Ismo Nironen.

Increasing the bank network

Collaboration with the other banks has made it possible to create a large European trading ecosystem with a critical mass of customers. The intention is to bring other European and international banks onto the we.trade platform in the future in a collaboration that will benefit all companies engaged in trade internationally.

Patrik Zekkar says: “With we.trade we have significantly reduced the financial risk of conducting cross border trade. This technology is a real breakthrough for small businesses in particular as it enables them to trade with other businesses that they may not have been able to trade with before due to risk and uncertainty. This platform is a controlled and transparent environment that removes the unknowns from the trading process and creates trust. However, it’s not only the technology that protects customers and gives them visibility – a rule book and a legal structure has also been put in place that stipulates the conditions around submitting transactions in we.trade.”

Ismo Nironen concludes: “The we.trade portal is simple and you don’t need to be an IT specialist to use it. If you can type the required information in a field and press ‘OK’ you are good to go. This is indeed interesting and will definitely decrease the step to making international trade. It will work really well in Europe, where the big partner banks are present. For us, certain Latin American countries are challenging, since they have different ways of conducting business, which means you need to adapt or skip the business case. If the right bank in Peru was in the we.trade network we would immediately get new business. It will be really interesting to see what happens next!”

Read more about we.trade at Nordea or contact txbmarketengagement@nordea.com