By Celine Chen
SINGAPORE, NNA - Following the recent launch of its secure financing platform to fight global financing fraud, MonetaGo has teamed up with IBM and started collaborating with partners on its deployment, beginning with the ASEAN region.
MonetaGo’s blockchain solution for financial fraud has been in production since 2018, enabling financiers to de-risk invoices before financing them, said the start-up in a press release issued on October 6.
"Digitization of key trade finance processes provides an opportunity for financial institutions to collaborate in new and exciting ways while maintaining the privacy of their customers’ data. Cryptographic hashing enables transaction information to be secure from being reverse engineered and thus to remain confidential. All parties can therefore ensure compliance with local laws and regulations while engaging in transactions across borders," stated New York-based MonetaGo which provides enterprise solutions for financial operations.
They are designed to be compliant with existing regulations and to improve the efficiency and security of financial products.
As they are built to support multiple technologies and interoperate seamlessly with existing financial infrastructure, financiers can integrate MonetaGo's products with minimal disruption or cost.
The launch of its latest global financing solution comes at a time when concerned top banking regulators have swung into action following a rash of large-scale frauds across trade finance, insisting that more should be done to identify risks in the sector.
The dramatic collapse of Australia's Greensill Capital and Singapore's Hin Leong Trading in the past year were the most recent high-profile examples.
Martin Chee, general Manager of IBM ASEAN, said, “This thought through approach of breaking down information silos between institutions while maintaining the privacy of customers’ data is an effective method to resolve trade finance problems. We are excited to team with MonetaGo to take secure financing into several ASEAN countries.”
Intra-ASEAN total trade in goods rose by a compound annual growth rate of 4.3 percent from $535.4 billion in 2015 to $632.6 billion in 2019. In 2020, due to COVID-19 pandemic disruptions, total intra-ASEAN trade in goods slipped to about $565.9 billion, according to a report on ASEAN intra-trade by Standard Chartered,
However, increasing cooperation and connectivity within the region is expected to boost regional growth.
Not only is ASEAN highly connected through free-trade agreements with major global trading partners such as the US, China and Europe, there is also significant focus on intra-ASEAN trade and investments – opening doors to new growth opportunities for companies in the region, said Standard Chartered.
"ASEAN offers a myriad of opportunities for local and international players in areas such as healthcare and consumer goods, construction, real estate, and renewable energy, given its favourable demographics, rapid urbanisation and drive towards sustainability. With Industry 4.0 under way, ASEAN’s rapid digitalization also provides grounds for growth in manufacturing and digital technology," said the report.
With MonetaGo and IBM working together, the secure financing solution will be integrated into platforms like we.trade, Tradelens, and PEPPOL.
Providing connectivity on an international level is a massive undertaking, but the benefits for end-users from small enterprises to large multinationals will help significantly shrink the trade finance gap and facilitate billions in financing, said MonetaGo.
Jesse Chenard, CEO of MonetaGo, said, "As we look to expand this solution across the globe, partnering with IBM provides value on many levels, from technical know-how to deep relationships with governmental bodies and financial institutions. By working with IBM, we know we can provide value to their clients in many countries in record time.”
According to Allied Market Research, the global trade finance market size was valued at $44.098 billion in 2020. It is poised to top $90.212 billion by 2030, registering a compound annual growth rate of 7.4 percent from 2021 to 2030.
It said, "Rise in need for safety and security of trading activities, surge in adoption of trade finance by SMEs in developing countries, increased competition, and new trade agreements are the major factors driving the trade finance market growth."
The research company believes the integration of blockchain technology in trade finance is expected to provide "lucrative trade finance market opportunities" during the forecast period.
The World Trade Organization (WTO) said some 80 to 90 percent of world trade relies on trade finance such as trade credit and insurance/guarantees), mostly of a short-term nature.
As the coronavirus pandemic had hampered the growth of trade last year, the WTO was encouraging "the revival of the complex links and networks involved in the trade finance market in order to keep finance flowing for trade, thereby mitigating at least one reason for the shrinkage of trade flows."
The welcome news this year is that resurgence of global economic activity in the first half of 2021 has lifted merchandise trade above its pre-pandemic peak, leading WTO economists to upgrade trade forecasts for 2021 and 2022.
The WTO is now predicting global merchandise trade volume growth of 10.8 percent in 2021, up from 8 percent forecasted in March and followed by a 4.7 percent rise in 2022.
"Growth should moderate as merchandise trade approaches its pre-pandemic long-run trend. Supply-side issues such as semiconductor scarcity and port backlogs may strain supply chains and weigh on trade in particular areas, but they are unlikely to have large impacts on global aggregates. The biggest downside risks come from the pandemic itself," said WTO in its statement on October 4.
Meanwhile, global investment company BNY Mellon has joined a consortium expanding the use of blockchain technology for international trade finance and digitalizing the provision of working capital to both suppliers and buyers across the globe.
Through its participation in the Marco Polo Network, BNY Mellon is now able to insert liquidity more efficiently into the international supply chain, providing finance solutions including both payables financing and receivables discounting to suppliers shipping goods and services to their buyers around the world.
The Marco Polo Network is a consortium of about 45 banks that provides an open software platform for trade, payments and working capital financing to banks, corporates and other market participants. The cloud-based network allows the seamless, secure and fast exchange of trade data assets in a multi-channel environment.
Utilizing Marco Polo, New York-based BNY Mellon can also have real-time visibility of trade finance instruments and their status, such as purchase orders and invoices.
Real-time visibility significantly speeds up the trade finance workflow.
"On the blockchain, the moment that both parties agree that the transaction terms are correct the trade is confirmed in real time. This means the data in trade documents are checked, matched and confirmed by both parties near instantaneously, enabling the faster delivery of working capital to finance the trade by liquidity providers like BNY Mellon," said the company which offers informed investment and wealth management and investment services in 35 countries.
In its press release on October 5, it said, "Digitization delivers particularly pronounced efficiencies for large buyers such as big box retailers that may issue tens of thousands of purchase orders each day and that previously had to rely on an antiquated paper and email-based workflow to secure trade financing."
Blockchain also reduces the risk that the same trade instruments could be used to secure working capital from multiple liquidity providers.
"This reduced credit risk increases confidence and the creditworthiness of clients and may translate into a better rate to obtain working capital," said BNY Mellon.
Such duplicate financial fraud is what MonetaGo is tackling.
Its mission statement on its website sums up well the risks in trade finance.
"Financial fraud and paper-based manual document workflow inefficiencies are persistent challenges faced by businesses across the globe. Trillions of dollars are lost each year due to inaccessible data and a lack of information sharing," said MonetaGo, adding that it wants to empower businesses to reclaim their lost value.