BNY Mellon Uses Blockchain To Digitize Working Capital In Global Trade Finance
NEW YORK, October 5, 2021 / PRNewswire / – BNY Mellon has joined a consortium working to bring blockchain technology to international trade finance and digitize the way working capital is delivered to suppliers and buyers across the world.
Through its participation in the Marco Polo network, BNY Mellon is now able to more effectively inject liquidity into the international supply chain, providing supply chain finance solutions including both debt financing and the remission of receivables from suppliers shipping goods and services to their buyers around the world.
The Marco Polo Network is a consortium of around 45 banks that provides an open software platform for commerce, payments and working capital financing to banks, businesses and other market participants. It is a blockchain-based cloud-based network that enables the transparent, secure and rapid exchange of business data assets in a multi-channel environment.
Using Marco Polo, BNY Mellon will not only provide financing to suppliers, but will also have real-time visibility into trade finance instruments and their status, such as purchase orders and invoices.
Real-time visibility dramatically speeds up the trade finance workflow. On the blockchain, the moment both parties agree that the terms of the transaction are correct, the transaction is confirmed in real time. This means that business document data is verified, matched and confirmed by both parties almost instantly, enabling faster delivery of working capital to fund the transaction by liquidity providers like BNY Mellon.
Digitization offers particularly pronounced efficiencies for large buyers such as big box retailers who can issue tens of thousands of purchase orders every day and who previously had to rely on an outdated paper and electronic workflow. to secure trade finance.
“The blockchain has the potential to transform the trade finance industry by replacing multiple systems with a single record shared through a distributed ledger. As all participants in the transaction will be immediately informed of each development in the trade lifecycle, this allows us to extend working capital faster and more securely to customers, ”says Joon kim, Global Head of Trade Finance Product & Portfolio Management at BNY Mellon Treasury Services.
The use of blockchain reduces the risk that the same trading instruments can be used to secure the working capital of multiple liquidity providers. This reduced credit risk increases customer confidence and creditworthiness and can translate into a better rate for obtaining working capital.
Digitization and the Marco Polo multi-channel network also open up the possibility of developing a liquid secondary market of trade finance, in which a trade instrument already subject to financing can be sold to another member of the liquidity-providing consortium, freeing up more than capacity to expand additional working capital.
Finally, the blockchain allows counterparties to monitor more transparently whether transactions comply with their environmental, social and governance (ESG) principles. The Marco Polo network provides users with an independent view of a large number of companies and applies an ESG score to each company which can allow participants to determine whether a company meets their environmental, social and governance values.
This includes the ability to track the working conditions of workers within the supply chain, identify whether raw materials have been obtained in no-go areas such as conflict zones, and monitor vehicle carbon emissions. used to ship orders.
Since the Marco Polo network operates as an open platform that enables connections through APIs, the network can accommodate a wide variety of enterprise resource planning (ERP) systems that suppliers and buyers around the world can use as part of their trade finance process.
“We are particularly pleased to participate in the Marco Polo network which will allow customers to interact with us and access financing in an open architecture compatible with most major ERP systems,” adds Kim.
Blockchain-based trade finance is just the latest step in BNY Mellon’s drive to accelerate the shift from paper to digital and make payments and commerce more efficient for customers. Last month, the company announced that Verizon had become the first customer to deploy Real-time electronic invoices and payments to customers, making it the first American company to extend this innovative new technology into the consumer retail space.
ABOUT BNY MELLON
BNY Mellon is a global investment firm dedicated to helping clients manage and maintain their financial assets throughout the investment lifecycle. Whether providing financial services to institutions, corporations or individual investors, BNY Mellon provides informed investment and wealth management and investment services in 35 countries. From June 30, 2021, BNY Mellon had $ 45 trillion in assets under custody and / or administration, and $ 2.3 trillion in assets under management. BNY Mellon can serve as a single point of contact for clients seeking to create, negotiate, own, manage, maintain, distribute or restructure investments. BNY Mellon is the corporate mark of Bank of New York Mellon Corporation (NYSE: BK). Further information is available at www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our press room at www.bnymellon.com/newsroom for the latest company news.
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SOURCE BNY Mellon