Recent weeks have brought a series of announcements on newly-launched trade finance initiatives that harness the potential of blockchain technology.
Among the most ambitious is Tradeshift Pay, described as the first Cloud platform to combine supply chain payments, supply chain finance and blockchain-based early payments in a single end-to-end solution. The fintech’s initiative is supported by more than a dozen major banks and card providers, including HSBC, Santander and CreditEase.
The group says that new technology can help shift the global capital trapped in accounts receivable due to archaic payment practices and the digital disconnect between large business buyers and their suppliers. In this interview, Tradeshift’s CEO and co-founder, Christian Lanng, outlines his hopes for the platform and the potential of blockchain:
Tradeshift Pay aims to address “a $9 trillion supply chain liquidity problem”. How does that figure break down and is it growing, reducing, or constant? Has there been progress in tackling the problem since the global financial crisis?
It has been fairly constant since the financial crisis where companies changed practice to keep their working capital for longer to have a risk buffer. This, in turn, put further strain on suppliers and partners and can reasonably be argued to have become one of the reasons for jobless growth in the first six to eight years after the 2008 crisis.
It is a complex problem to solve, since no-one technically is wrong. Large companies have a right to keep their working capital and suppliers have a right to ask for it sooner. The solution is often to insert financing between the two parties, but unfortunately most buyers and sellers don’t have the technology to make this process efficient at scale. That’s exactly what we are doing with Tradeshift Pay, connecting, invoicing, approval, payment and working capital lending on one platform, to make the whole process efficient and not broken down into individual silos.
Blockchain is now moving beyond the concept stage, with actual initiatives launched to make supply chain finance more efficient. How far have fintechs progressed in developing its potential – is there more to come that we haven’t yet seen?
Blockchain is a promising technology and while much of the focus and hype, unfortunately, have been on cryptocurrencies there are a lot of exciting real-world applications. In our case we allow companies to write their payables to either public or private ledgers, making them available for third party financers and give transparent access to financial information on an immutable ledger.
The security of new digital channels has grown into a major concern – are there safeguards to ensure the new platform can’t be infiltrated or used for fraudulent transactions?
Tradeshift is a cloud platform which is certified to the highest standards, we are International Organisation for Standardisation (ISO), Service Organisation Controls (SOC1 and SOC2) and Payment Card Industry (PCI)-compliant and trusted by more than 150 of the Fortune 500 companies. We also work with all the major banks as customers and partners, meaning we have been vetted in every detail.
Since we carry out know-your-customer (KYC) checks on new companies joining the platform this is one of the most trusted business networks in the world. This also means that you can probably sleep a little better working with us when it comes to new technologies like blockchain.
We reported on the launch in January of your digital innovation arm and incubator Tradeshift Frontiers. Its goal is “to significantly impact B2B commerce and global supply chains in the next five years” – how do you see this being achieved?
Really in three major ways; firstly by leveraging blockchain technology to solve hard problems in domains that have required many stakeholders to collaborate, such as track and trace or instant audits.
Secondly by integrating the physical and the digital supply-chain much better, but working with major partners around the Internet of Things (IoT) and sensors connected to buying or paying in the supply-chain. Finally, we are pushing artificial intelligence (AI) in a number of very promising areas. It’s clear that the many daily decisions in supply-chains can benefit from AI technology, such as comparing documents, decisions on payables or real-time insights.
Tradeshift Pay is working with a handful of major banks, including HSBC, Santander and CreditEase. Do you plan to roll it out to other, or continue to work with a few trusted partners?
Yes, there has been an overwhelming interest in participating on the Tradeshift Pay cloud, which we attribute to our leading role in supply-chain payments. We’re planning to announce a number of additional banks and finance partners over the summer and are currently adding one or two banks every quarter.
Are you concerned that recent talk of trade wars between the world’s major economies and imposing tariffs could undermine the efficiencies new technology is opening up for supply chains?
I’m always an optimist – trade is what binds us together, it shouldn’t separate us. That said, I think we can do more to avoid unnecessary conflict and escalation as we recently have seen between US and China. Yet even without trade wars or tariffs, global trade is becoming increasingly complicated to facilitate and technology is the answer here to making it easier.