BNY Mellon Participates With Marco Polo For Blockchain-based Trade Finance
According to the latest reports on Oct. 11, 2021, BNY Mellon has joined a consortium operating to bring blockchain technology into global trade finance and digitize the facilitation of working capital to both exporters and importers across the world.
The participation with the Marco Polo network allows BNY Mellon to incorporate liquidity into the global supply chain more effectively, giving supply chain finance solutions including both payables financing and receivables discounting to exporters engaging in shipping goods & services to their importers across the world. But BNY Mellon is not the only one to consider Marco Polo’s blockchain network. A few months ago, in July, 2021, the digital trade finance network Contour adops Marco Polo for open account trade finance.
The Marco Polo Network is a group of around 45 banks that enables banks, corporates, and other market members to leverage an open software platform for trade, payments, and working capital funding requirements. It is a cloud-based blockchain-controlled network that enables the smooth, uninterrupted, and quicker exchange of trade data assets in a multi-channel environment.
Using the Marco Polo network will enable BNY Mellon to not only provide funding to exporters but will also have real-time transparency into trade finance instruments and their statuses, such as purchase orders and invoices.
Real-time visibility fundamentally accelerates trade finance procedures. On the blockchain platform when both the parties get satisfied with the relevance of the terms of the transaction, trade is affirmed in real-time. It implies that the data in trade documents are verified, matched, and confirmed by both parties near instantaneously, allowing quicker delivery of working capital to fund the trade by liquidity providers like BNY Mellon.
Digitization is extremely helpful in boosting pronounced efficiencies in large buyers such as big-box retailers that are expected to issue tens of thousands of purchase orders each day and that recently required to be dependent on lengthy paper and email-based working procedures to ensure safe trade financing.
According to Joon Kim, Global Head of Trade Finance Product and Portfolio Management in BNY Mellon Treasury Services, “Blockchain can transform the trade finance industry by replacing multiple systems with a single shared through one distributed ledger. As all members in the transactions will get instant updates of each progress, going on in the trade procedure, this gives us the power to accelerate working capital quicker and more safely to clients.”
Leveraging the technology of blockchain eliminates the risk of using the same trade documents to secure working capital from multiple service providers. This eliminated risk further boosts the confidence and creditworthiness of customers and may convert into a better rate to get working capital.
Digitization of the trade finance industry and the multi-channel Marco Polo network also provide an opportunity to grow a liquid secondary market in trade finance, in which a trading instrument that is already liable to financing can be offered to an alternative liquidity service provider consortium member, releasing more capacity for additional working capital to be extended.
Finally, the blockchain allows counter-parties to more efficiently monitor whether the trade activities match with their environmental, social, and governance (ESG) standards. The Marco Polo network facilitates users with an autonomous review into an enormous number of corporations and incorporates an ESG score to each organization that can allow members to decide whether an organization fulfills their environmental, social, and governance principles.
This incorporates the capacity to follow the work conditions for laborers within the supply chain, figure out whether raw materials were achieved from restricted areas such as conflict zones, and screen the carbon emission of vehicles being utilized to ship orders.
Since the Marco Polo Network works as an open platform that enables connections through APIs, the network can bring a wide variety of Enterprise Resource Planning (ERP) systems that exporters and importers across the world may be using as part of their trade financing process.
Kim adds, “We are especially glad to be a member of Marco Polo Network as it will help customers communicate with us and access funding in an open architecture viable with most major ERP systems.”
Blockchain-based trade finance is the most recent advance in BNY Mellon’s initiative to facilitate the paper-to-digital flow and make payments & trade more effective for customers. Earlier, it was reported by the organization that Verizon has become the first customer to execute real-time E-bills and payments to customers, making it the first US corporation to increase this advanced new technology into the retail consumer space.