American International Group, Inc. and TradeIX Limited announced today the successful completion of the first blockchain-enabled trade finance transaction for a global logistics company with financing provided by Standard Chartered plc.
TradeIX and global insurer AIG have partnered to enable trade finance transactions for companies, using the blockchain-enabled TIX platform. Trade finance programmes give companies access to capital, allowing them to improve their payment terms with their suppliers and clients.
This invoice finance transaction took place at the end of September and enabled the logistics company to help its customers extend their payment period whilst maintaining the company’s receivables at current terms. The financing was offered by Standard Chartered and credit risk mitigation was offered by AIG.
Managing global invoice payments can be time-consuming and inefficient for companies, as trading partners often have unique requirements based on specific payment terms, currencies, country-specific laws, and contract terms. Because of this, companies often establish multiple, local, trade finance programmes, which can involve duplication, inefficiencies and minimal standardisation across the organisation. This makes it harder to optimise working capital and have effective visibility of compliance and counterparty risk across the company.
Through the transaction announced today, TradeIX, AIG and Standard Chartered Bank partnered to create a secure and more efficient solution through blockchain technology.
TradeIX has developed a trade finance platform powered by permission-based distributed ledger technology. By using this ledger, companies can have their invoices placed securely on the TIX platform, giving real-time visibility to manage customer terms and credit risk. All details of the invoice and the eligible insured amount are securely recorded on the distributed ledger.
The invoices are sold to the finance providers and credit insured by AIG. AIG also provides the benefits of Aronova, its trade finance technology provider, which tests policy invoice eligibility for the insured financiers.
Marilyn Blattner-Hoyle, Head of Supply Chain and Trade Finance at AIG said: "Using blockchain technology to facilitate trade finance transactions makes it easier for companies to benefit from trade finance, allowing more companies better access to working capital and making insurance more available to finance-providers. By using this blockchain-enabled platform, clients are able to benefit from the extended ecosystem that trade finance brings, but with a reduction in friction and cost and an improvement in speed and transparency."
Farooq Siddiqi, Global Head, Trade, Transaction Banking at Standard Chartered said, “Digitalisation of trade and trade finance is integral to our strategy and by working together with leading fintechs, we can create innovative solutions to better support the financing and information needs of our clients and their ecosystem of buyers and sellers.”
Rob Barnes, CEO of TradeIX, said: “We are changing how trade finance is being offered through our Trade IX platform. It is designed and positioned as a “Network of Networks” platform focused on low-cost transaction execution in a highly-secure environment, representing the world’s first shared and open infrastructure for global trade. The launch of our first major transaction with AIG marks a significant step forward in bringing our innovative solution to leading financial institutions and global corporate clients. We look forward to expanding our relationship with trade finance parties to reduce cost, lower risk and enhance funding opportunities in the large and growing trade finance market.”
Neil Ross, Global Head of Trade Credit at AIG said: "This relationship with TradeIX reflects AIG’s commitment to seek out partners with the best technology so we can explore innovations that will benefit our clients. We selected TradeIX as a partner because of its rare combination of deep technology expertise and extensive knowledge of the trade finance market. This partnership is part of our ongoing commitment to co-develop new technology that matters to our clients; first demonstrated in the multinational blockchain pilot announced earlier this year, also with Standard Chartered.”
You can meet the TradeIX, AIG and Standard & Chartered teams at BCR’s forthcoming Alternative & Receivables Finance Forum where they will present a Case Study on their recent transaction.