Lloyds and Mercore Capital have completed a series of landmark transactions under the International Trade and Forfaiting Association’s (ITFA) Digital Negotiable Instrument (DNI) Initiative, highlighting the ease and advantages of digital trade based on shared principles and advanced technology.  

The Documentary Collection transactions involved the shipment of sugar from Mercore’s client, an exporter based in the Americas, to Lloyds’ client in the UK. 

Mercore created a draft digital Bill of Exchange (dBE) on Enigio’s trace: original solution and arranged for it to be drawn by their exporting client. The drawn dBE was transferred via a node-to-node transfer on trace:original to Lloyds which then arranged for the dBE to be electronically accepted by its importing client. On confirmation of acceptance by Lloyds, Mercore was then able to purchase the dBE from its client, pre-paying them ahead of maturity. 

These transactions are the first under ITFA’s DNI Initiative to involve the node-to-node transfer of a DNI between two separate financial institutions, and the first to involve the handling of a DNI between two financial institutions each facing off to an importer or exporter. Prior DNI transactions have involved only one financial institution interacting with both the importing and exporting party. 

The use of a digital Bill of Exchange allowed for faster execution compared to a paper process, resulting in earlier access to funds for the exporter, supporting their working capital needs.

Surath Sengupta, Managing Director of Trade Innovation and Transformation for Lloyds said: “It’s been fantastic to be involved in these groundbreaking trades that build on the success of the world-leading digital transactions we have completed over the last two years. 

“Digital trade solutions make it simpler, faster and more efficient for our clients to do business. These transactions with Mercore demonstrate the ease at which digital documents can be created and transferred between parties, and will create more opportunities for digitalisation. We look forward to collaborating with more clients and banking partners to make digital trade a reality.”

Anthony Wadsworth-Hill, Co-Founder, Chief Business Officer and Deputy CEO of Mercore said: “Mercore is delighted to partner with Lloyds Bank to bring about this digital ‘first’ for the market. We believe that greater collaboration between banks and non-banks is critical to drive improved financial inclusion for businesses in the UK and overseas. We expect this to be the first of many transactions with Lloyds Bank, and we encourage other banks and non-banks to do the same – given the win-win efficiency benefit to both institutions and their clients. Mercore is a fast adopter of digital trade solutions and looks forward to further ground-breaking transactions to help close the global trade finance gap.”

Andre Casterman, ITFA Board Member and Leader of the DNI Initiative said: “I congratulate both Mercore and Lloyds for delivering the first DNI transaction involving two financial institutions, as per ITFA’s DNI Initiative 2024 priorities. Such transaction demonstrates the scalability of digital negotiable instruments when implemented in a collaborative way using interoperable technologies. There is much to be expected on this front as the simplicity and ease of use of the interoperable bills of exchange offer much potential for bank and non-bank lenders to partner at cross-border level, and redefine the scope of Supply Chain Finance.”

ITFA’s DNI Initiative aims to fully digitise Bills of Exchange and promissory notes in cross-border trade by agreeing standards and principles for digital transactions, and advocating for new technological and legal frameworks.

In August 2022, Lloyds completed the UK’s first transaction utilising a digital promissory note purchase under the DNI Initiative’s Electronic Payment Undertaking (ePU) standards. In February 2023, Mercore, with the support of shared learnings from Lloyds, completed the first ePU Bill of Exchange transaction. 

Both transactions were executed using Enigio’s trace: original solution. This removes the need to physically transfer paper negotiable instruments, enabling the creation of digital documents that can be ‘possessed’ by an individual, transferred between parties, and distinguished from copies, just like paper-based counterparts.

This means digital documents can be used in processes where an ‘original’ document is required. Unlike other digital trade solutions, trace: original only requires the party creating the document to be an Enigio user.