Commerzbank and Partners Execute Live Transactions on the ‘Marco Polo’ Trade Finance Network
- Payments , Money Transfers , Banking
- 27.05.2021 12:35 pm
|●||Commerzbank successfully executed two live transactions to secure payments for commercial transactions based on blockchain technology|
|●||Key milestone for the market launch of Marco Polo Payment Commitment|
In May 2021, Commerzbank joined with İşbank and LBBW to become one of the first banks to execute commercial transactions with German and Turkish corporate clients via the Marco Polo trade finance network in a live environment. The purpose of these transactions was to establish an irrevocable payment commitment to the supplier, issued by the buyer’s bank.
With these live transactions, Commerzbank has reached a key milestone in the run-up to the market launch of Marco Polo Payment Commitment. The data required to establish the payment commitments for both transactions was exchanged in a digital format via the Marco Polo trade finance network, using Corda blockchain technology.
The first cross-border transaction took place on 10 May 2021, in cooperation with İşbank, between corporates Kuraray Europe GmbH and Şişecam. The underlying commercial transaction involved the export of laminated special glass interlayers from Germany to Turkey. The payment by open account has been replaced by an irrevocable payment undertaking with digital exchange and matching of trade data.
The second transaction – the ‘go-live’ in Commerzbank’s home market of Germany, followed on 20 May 2021, in cooperation with LBBW and between KSB and Voith. The underlying transaction was the purchase of special couplings. As with Commerzbank’s first live transaction, the data transfers required to secure payments between the pump and valve manufacturer KSB and the technology group Voith, as well as the credit institutions involved, were performed in a secure and closed area with access only permitted to the parties involved in the transaction.
A Marco Polo Payment Commitment is an irrevocable, abstract undertaking by the buyer's bank to the supplier to make payment on the due date. The payment commitment is based on the exchange and successful automatic matching of digital trade data in the DLT/blockchain network, thus providing financing options.
Nikolaus Giesbert, Divisional Board member Transaction Banking at Commerzbank AG, said: “Our clients are looking for innovative supply chain management solutions. Commerzbank is focusing on speed and transparency in this area, where blockchain applications have tremendous potential. This transaction is a major step towards market launch.”
“KSB is an international digitalisation pioneer in our sector, and has set standards with many innovative solutions,” said Dr Stephan Timmermann, KSB Management Spokesman. Dr Matthias Schmitz, Managing Director responsible for Finance and Procurement, added: “After digitalising our production and products wherever possible, we are now systematically approaching digitalisation of our processes. The Marco Polo platform, and technologies such as blockchain and distributed ledger, are allowing us to raise our trading processes to a new, paper-free, and – most importantly – secure level.”
“Following our pilot transaction in 2020, we were thrilled to carry out a first live transaction using the Marco Polo platform. Having automated and digitalised most of our internal processes over recent years, the Marco Polo network is the perfect match for our digitalisation strategy. With Commerzbank, İşbank and Şişecam, we have joined forces with valuable business partners to pave the way for digitalisation of one of the last remaining paper-based processes – documentary payments“, emphasised Juliane Löbig, Director Finance & Accounting at Kuraray Europe GmbH.
“Live payment commitment transactions involving KSB, Kuraray, Şişecam and Voith, and Marco Polo member banks Commerzbank, İşbank and LBBW are proof that digital end-to-end settlement processes with a high degree of automation and an electronic data exchange are possible, and will become a reality in trade finance“, noted Daniel Cotti, Managing Director, Centre of Excellence Banking & Trade at TradeIX.
As a founding member of the Marco Polo initiative, Commerzbank – together with LBBW and Turkey’s İşbank – was one of the first banks to settle Marco Polo Payment Commitments for live commercial transactions digitally via Marco Polo’s distributed-ledger technology (DLT) network. The network, operated by the FinTech TradeIX, is built on R3’s Corda blockchain technology.