Mirka Skrzypczak is the head of working capital and trade products at NatWest and a leading voice on the use of blockchain technology to transform trade finance. In this next instalment from Marco Polo’s series featuring the views of industry innovators, she provides an overview of the bank’s journey with the Network thus far, the challenges that banks face when working with new technology, and the need for a community of practice to share lessons learned.
Q: What are your thoughts on the evolution to a network approach for trade and supply chain finance, as being developed by Marco Polo?
Skrzypczak: Trade is global, and you cannot do it alone; there is always a minimum of two parties, the buyer and the supplier, and each of their banks. It has always been the case that trade has to be a very connected system. But it isn’t a perfect system, it has its challenges, one of which is that it is heavily paper based. So trade has to digitise, and in doing so provide reassurance to all of the parties involved. I believe that distributed ledger technology provides that additional layer of security that we never had before. It has the ability to drive a decentralised network and break down the silos that exist today. That’s what Marco Polo is trying to address.
The network approach is important: Marco Polo is not a destination platform, it’s decentralised. This provides an opportunity for banks and their customers to seamlessly interact with the global trade and supply chain ecosystem. It means that, as a corporate, if I want to access my supply chain finance, and interact with all my banks to do so, I don’t need to go to the individual network systems or destination platforms that we all currently operate. I can use Marco Polo to access my banks – it provides one entry point.
Q: Can you talk through your impression of the Marco Polo modules, and NatWest’s journey with the network thus far?
Skrzypczak: NatWest has been involved in Marco Polo from the outset, driving the debate – alongside the other banks – about what the network’s functionality should be. The experience has been great; our first involvement taught us how to think outside the box. To begin with, this was not an easy task, with all the participants involved in these discussions working at different banks, and trying to agree on how to build a new platform. At the time it was unthinkable. Now it’s normal practice. It’s incredible how that journey has developed.
Initially, at NatWest, we were very interested in the supply chain finance – Receivables Finance – module, which was key for us as an institution, and we spent a lot of time working with the Marco Polo Network (formerly known as TradeIX) team on this. That work was put on hold this year because of priorities in light of the pandemic. But it doesn’t mean we stopped believing in Marco Polo, we still believe it is the future.
What we’re also starting to shift towards now, which was previously not our focus, is the Payment Commitment module. We are now starting to see how that module can allow SMEs to access trade instruments; it gives them an alternative to letters of credit (LC). The Payment Commitment gives almost the same level of security as an LC, but is potentially cheaper than an LC, and far easier to set up. We’re very keen to see how that develops.
Q: It’s understood that banks often struggle with buying into new ways of doing things, and new technology, etc. How can these challenges be overcome to ensure continued engagement and progress?
Skrzypczak: That’s a very pertinent question. When working with new technology, everybody’s going to have very similar challenges. It’s funny, as banks we think that we can take technology and make it our unique selling proposition, but we cannot – the same way we could not make the internet our USP. I think the banks that joined Marco Polo at the start understood that, that in order to harness new technology, you need to work collaboratively.
I think the challenge is that you’re not just dealing with one new technology; it is not just learning about distributed ledger technology. You also need to start learning about a whole myriad of other things, such as cloud environments, and the difference between cloud and on-premise software, for example. You then need to understand that very robust connection layers must be built between the new and existing technologies, which is challenging because banks have a lot of old technology. You’re not getting rid of existing applications – there needs to be connectivity, and that integration is the biggest challenge for the banks. But who’s going to help you with that integration? The technology is so new that you don’t have in-house resources; you need to find reliable resources in the wider market – ones that aren’t just going to squeeze you for money.
The more people start understanding the issue around integration and educating one another about it, the better. And the more people that have the ability to connect to a network like Marco Polo, the better the network. Otherwise it’s a bit like trying to build the internet with just a few computers.
If institutions have challenges with how to connect, then there has to be a community of practice where people share the best solutions, because it is in all of our interests.
We’re still in that old mindset of keeping things for ourselves. We need to find a better way that does not compromise an institution’s investment spend but allows the ability to share some of the knowledge or lessons learned with the broader financial community. It can be difficult to find that balance.
Q: Where do we want to get to? What is the ultimate goal we’re working towards in terms of digital trade?
Skrzypczak: The ultimate goal is the ability to interact, one blockchain to another – and it won’t just be Marco Polo, it will be other networks too.
But even before we reach that, for me, it’s that it is all done on blockchain in the first instance. I don’t think there is any other solution. We can’t keep pushing more and more digitisation and hoping that is going to keep us safe and secure without enhanced security protocols. At this point in time, I believe there is nothing better than the cryptographic properties of distributed ledger technology to do so. The goal is that people finally switch over on to that in the same way that we started using the internet and APIs, and do so without a second thought; it’s that they use Marco Polo without even thinking that they’re doing so.
Q: Covid-19 has accelerated digitalisation efforts in trade to ensure that deals get signed and financed. What have been some of the bank’s own efforts and successes in this regard?
Skrzypczak: NatWest is in a very similar situation to all the banks that participated in the various UK government business interruption loan schemes. Just by the sheer size of our institution, we received a significant level of demand for those loans from our existing customers, and we had to find ways of processing them as quickly as possible. That really drove innovative thinking and collaboration as we worked towards a more technical solution. It was like building a plane while it was in the air.
Our biggest challenge was not that we couldn’t do it – because we could – but rather avoiding the ‘rubber band’ syndrome, as I call it, of a return to the old ways of doing things. So, for us, the key task now is how to maintain that positive momentum, because it has driven an amazing customer experience in terms of automation and throughput of data – things that we were trying to solve for months that were suddenly accelerated.
With regards to trade, the biggest challenge the industry had in this pandemic was the physical presentation of documents. Working together with SWIFT, we eliminated the need for physical document presentation between banks, and we moved on to an electronic solution. Again, making sure we maintain that standard post-pandemic is key, and I believe there is appetite to do so.
Mirka Skrzypczak is an experienced product expert with 15 years of experience in the banking industry. She currently leads the Working Capital Product team for NatWest, which covers Trade Finance, Supply Chain Finance, Invoice Finance and Overdrafts.
Her team manages all stages of the product lifecycle, including new product development, product strategies, pricing, distribution and servicing of existing products. Mirka is passionate about driving innovation and technology change and leads the bank’s interaction with the R3 blockchain consortium, working as a subject matter expert on the Marco Polo initiative to deliver practical applications of blockchain in cross-border trade.
Mirka joined NatWest in 2010, having previously worked for GMAC and GlaxoSmithKline. Mirka has a Master’s degree in economics from the University of Economics, Poznan, Poland.
About the author
Shannon Manders is an editorial consultant and award-winning international trade finance journalist with over a decade of experience reporting and producing print and online publications on the global trade and trade finance sector. She is also the editorial director of international trade finance publication GTR, where she has been working since 2008.