Linking shipment data to trade finance decisions is becoming more common, evidenced by the shipment management software provider CargoSmart working with four banks and two shipping lines to speed applications for financing services and expand the ability of banks to extend credit to small and medium enterprises (SMEs).
CargoSmart said Tuesday it has completed a proof of concept linking two blockchain networks — one tied to financial services and the other to data. That connection allows eTradeConnect, a multi-bank blockchain consortium in Hong Kong facilitated by the Hong Kong Monetary Authority (HKMA), to access relevant data from ocean carriers and terminals to shorten the shipping documentation validation process those banks typically undertake to approve financing services for shippers.
“Banks would be able to shorten the customer validation process, with a better understanding of customers’ backgrounds and with real-time, credible shipment event data,” CargoSmart said in a statement.
CargoSmart offers software primarily to shippers to manage global logistics and customs compliance processes. The company has been developing, in tandem with Oracle, a consortium aimed at using blockchain to reshape core global trade processes, called the Global Shipping Business Network (GSBN).
The private version of blockchain technology is based around a distributed ledger that permissioned parties can contribute to and access. The benefit of blockchain-based solutions is that information entered into them is tamper-evident and thus theoretically provides better data and process authentication. The technology was much hyped in 2017 and 2018, but in 2019, that hype has receded a bit as actual use cases are developed with less fanfare.
Lenders participating in the CargoSmart proof of concept include Bank of China (Hong Kong), The Bank of East Asia Limited, HSBC, and Standard Chartered Bank (Hong Kong) Limited, while the container lines involved are COSCO Shipping Lines and its subsidiary, Hong Kong-based OOCL.
CargoSmart said it believes the four eTradeConnect member banks also will be able to use data to improve their risk management processes and to extend credit to SMEs.
Growing trade finance options
CargoSmart’s interest in facilitating global trade finance is one of many recent examples of established players and smaller entrants providing products based on existing relationships or shipment data. CMA CGM last week said it has begun offering financing services to importers and exporters through a new Shipfin Trade Finance product, while Maersk has been offering trade finance options globally to customers since 2017. The visibility provider Arviem in March announced it is using data from in-transit cargo to underpin shipment financing while the forwarder Flexport established its Flexport Capital subsidiary to help importers manage working capital.
“The exchange of trusted and immutable data enabled by blockchain gives rise to a seamless and secured linkage across the global trade and financial sectors,” CargoSmart Chief Commercial Officer Lionel Louie said in a statement. “The convergence of both worlds will unleash enormous opportunities for global trade and give impetus to international economic growth.”
“Based on the feedback we obtained from previous eTradeConnect pilot transactions, HSBC sees the need and demand for a single platform where clients can facilitate cross-border trade,” Jeanny Ip, head of global trade and receivables finance, Hong Kong and Macau, HSBC, said in a statement. “Clients are telling us that they want a more comprehensive customer journey, one that removes duplication. This is a win-win for all participants of international trade.”