Leverages open source blockchain and smart contracts to streamline trade finance process, drive growth for businesses and revenue opportunities for banks
Read the full case study here.
In 2019, the Stockholm-based sustainable shoe company Flattered AB needed to re-examine its trade relationship with its suppliers in Spain. In order for Flattered to secure specialty materials such as chrome-free leather and vegan alternatives that are key to the brand’s eco-friendly mission, the company was required to make upfront payments for all its supplies.
But with long-lead production cycles that stretch over a year, Flattered faced an unsustainable gap between costs and income, which significantly impacted cash flow at the company.
Small and medium-sized enterprises (SMEs) such as Flattered AB represent 90% of the businesses and 50% of the employment worldwide, according to the World Bank. And yet SMEs traditionally do not have access to bank guarantees, invoice financing, or credit insurance to help maintain and scale their businesses. Instead, SME owners are left to navigate a laborious paper-based process to account for their international transactions with no protections against late invoice payments, fraud, or managing pre-payments.
Now with the growing urgency for seamless, transparent, and traceable transactions amid the global pandemic, improving access to trade finance has proven to be more vital for economic recovery and a more effective public health response around the world.
This is where we.trade steps in. As the world’s first enterprise-grade, blockchain-enabled trade finance platform, we.trade offers a safe and more reliable platform for buyers and sellers to trade globally using distributed ledger technology and smart contracts.
Through a joint venture between seven European banks, we.trade was established as an independent company based in Ireland in 2017. Today the company is owned by 12 banks, technology leader IBM, and global commercial credit and business information provider CRIF with shareholders from institutions such as CaixaBank, Deutsche Bank, Erste Group, HSBC, KBC, Nordea, Rabobank, Santander, Societe Generale, UBS, and UniCredit. In 2019, the company brought we.trade technology to market under a SaaS model and has already onboarded 16 banks across 15 countries onto the platform.
Until the launch of we.trade, the universal solution for open account trading or documentary trading was to use paper. But the slow process led to a lot of replication, with business owners filling out the same documents for different trade partners and leaving themselves more susceptible to forgery and human error.
With we.trade, companies can operate with digitized versions of once manual business processes to ensure signatures, contracts, and trade financing agreements can be virtually linked and effortlessly executed.
The challenge to launching a network like we.trade is convincing competing and disparate stakeholders in the trade finance ecosystem to join the same platform. It is impossible to entrust all transaction data to one party. So we.trade recruited IBM as its engineering partner to build a solution using Hyperledger Fabric, one of the blockchain platforms hosted by the Linux Foundation.
With Hyperledger Fabric’s modular blockchain architecture, we.trade was able to prioritize privacy and customize its platform with selected features such as transaction isolation among selected parties in the blockchain and off-chain data storage.
Now with we.trade, SMEs can secure and finance their trade transactions without having to be an expert in trade finance or blockchain. But the real revolutionary component of we.trade is the ability to issue event-based payments based on conditions agreed upon in smart contracts on the blockchain.
Through we.trade, companies receive access to risk mitigation and financing services that are not readily available to them while banks create new revenue-generating services. The entire ecosystem is available in a real-time, user-friendly digital platform that leads to shorter trade cycles and improved working capital.
Hyperledger worked up with we.trade on a case study that details the business and tech drivers for this digital platform as well as the role of open source software and governance in its launch, growth and plans for scaling from here.
Read the full case study here.