Fully digital transactions based on blockchain technology to secure payments for trade transactions.
Joint project with the companies Voith and KSB, as well as Commerzbank as banking partner.
Major milestone on the path to market readiness.
LBBW and its partners settled trade transactions for the first time in a live environment via the Marco Polo trade finance network last week, creating an irrevocable payment risk management to the supplier. The process was fully digital without a parallel paper-based process. Following several pilot transactions, this first live transaction is a major milestone on the path to market maturity.
Go-live with KSB and Voith
Object of the transaction was the delivery of special couplings. The required data transfers for the payment risk between the banks, LBBW and Commerzbank, as well as between the pump and valve manufacturer KSB and the technology group Voith, were performed in a secure and closed area, with access only permitted to the parties involved in the transaction. The time-consuming process with paper trade documents, including preparation, dispatch, and check, as known from the documentary letter of credit, has been replaced by the fully automated matching of trade data. The distributed ledger, built on Corda, ensures the necessary liability as well as the required confidentiality of the settlement. Thanks to the fully transparent settlement process, KSB, Voith, and the banks involved maintained exclusive visibility on every step along the process.
LBBW and Commerzbank are two of the founding members of the Marco Polo initiative and the first banks in Germany to settle trade transactions digitally and in real-time on Marco Polo’s distributed-ledger technology (DLT) network. The pioneering work of the two banks and its business partners ranges from creating and settling a digital payment risk management through to preparing technical integration of innovative blockchain technology into internal infrastructures.
The network, operated jointly with the FinTech Marco Polo Network (formerly known as TradeIX), is built on R3’s blockchain technology Corda, which offers a variety of solutions for different applications in trade finance, supply chain finance, and beyond. The distributed ledger technology on which Marco Polo is based revolutionises this process with decentralised and simultaneous data transmission between parties involved in the network.
“This is absolutely the right time for this innovation to come along. The coronavirus pandemic has shown how susceptible to disruptions paper-based settlement is. Thus, it is all the more important that we can offer our clients a secure, efficient, and fast digital trade finance process with Marco Polo,” says Dr Christian Ricken, member of LBBW’s Board of Managing Directors and responsible for the capital markets business, asset management, and international business.
“We would not have got this far without the trusting and uncomplicated cooperation between all parties involved,” Gerald Böhm, Head of Export and Trade Finance at Voith GmbH & Co. KGaA, emphasises. “We are looking forward to many interesting discussions with other companies and banks, so that we can use the payment risk management module more often.”
“KSB is an international digitalisation pioneer in our sector, and has set standards with many innovative solutions,” says Dr Stephan Timmermann, KSB Management Spokesman. And Dr Matthias Schmitz, Managing Director responsible for Finance and Procurement, adds: “After digitalising our production and products wherever possible, we are now systematically approaching digitalisation of our processes. The Marco Polo platform, and technologies such as blockchain and distributed ledger, are allowing us to raise our trading processes to a new, paper-free, and – most importantly – secure level.”
“In achieving the live payment risk management transaction, together with KSB, Voith, Commerzbank, and LBBW, Marco Polo has proven that it is a reality to operate fully digital trade finance transactions that require high-level of automation and data matching, leveraging blockchain technology” adds Daniel Cotti, Managing Director Centre of Excellence Banking & Trade at Marco Polo Network (formerly known as TradeIX).