Carl Wegner is the CEO of Contour, a blockchain-based open industry platform to create, exchange, approve, and issue Letters of Credit on Corda, R3’s blockchain platform. In this podcast, Carl talks through the challenges the trade finance industry faces in terms of digitisation since 2005 and how blockchain can represent an opportunity to reach that objective.

Carl has been working in the Fintech space for the last 30 years in Asia. Twenty years in large banks such as Bank of Boston, Standard Chartered and Deutsche Bank on transaction banking, trade finance and cash management. Ten years in tech working at GT Nexus, at R3 setting up their Asian operations and now at Contour.

 

What is blockchain?

To define what is blockchain, Carl prefers to take it down a notch and instead define what is distributed ledger technology (DLT). DLT is an opportunity for enterprises to manage their own data within their own database instead of via a central database. DLT participants own their data and have a protocol to share it. In comparison to blockchain where data is broadcast to everyone with a method of consensus, R3’s Corda, which Contour is built on, allows everyone to have their own database with a protocol to share their data in a selected manner.

 

International trade and the trust deficit

In 2018, the global trade finance market was valued at $39.7 billion, according to Allied Market Research. Whilst, an ADB’s (Asian Development Bank) 2019 Trade Finance Gaps, Growth and Jobs Survey found that the global trade finance gap remains at around $1.5 trillion, nearly 60% of respondents expect the gap to increase over the next 2 years.

Source: WTO& ICC

 

In international trade you have a trust deficit between buyers and sellers in far off countries. With the internet that trust deficit has been somewhat reduced. Prior to the internet buyers had to put money down for a shipment that may turn up three months later without necessarily knowing who the seller is.

The challenge for SMEs is related to data. A bank as a lender, a facilitator of credit is looking not to make a mistake. The challenge for SMEs is to have sufficient information to fit the requirements of a bank’s traditional credit scoring sheet.

Organisations like ADB and other development banks will step in and provide some support either directly with guarantees, with training to help SMEs on how to present themselves to banks and other actions. Fundamentally though, the challenge is around data. SMEs being able to provide the right data and bank’s understanding on how to use the data outside of just the traditional model. COVID-19 has created a “digital transformation opportunity for banks to use data in different ways to be more efficient with it and offer credit to a wider range of customers.

 

The state of digitisation in the trade finance industry

Carl Wegner from FNian

 

In 2005, Carl Wegner participated at the APEC Paperless Trading Initiative where he produced a set of slides “