The future of trade finance
FinTech Futures sat down with several top experts in the trade finance industry to discuss the future of the industry. The interview also covers the recent announcement about the Mastercard and Marco Polo partnership and its potential for the future of trade finance.
In this interview, we speak with Claire Thompson, executive VP of enterprise partnerships at Mastercard, Mirka Skrzypczak, head of working capital & trade products at NatWest, and Nicholas Barnes, manager of the Marco Polo business network at TradeIX.
FinTech Futures (FF): Can you tell us about Mastercard Track and its role within the Marco Polo Network?
Claire Thompson (Mastercard): We joined the Marco Polo Network in the summer of last year with the mission to simplify the way companies do business with one another. If you think about what Mastercard has been doing over the last 50 years, it is essentially running a global payments network alongside with our partners. With Track and other initiatives, we’re now expanding this further into B2B, bringing parties together whether it is a financial institution, government, technology solution providers, buying organisations or suppliers.
Cooperation is the core competency of Mastercard and that’s what we bring into this partnership with the Marco Polo Network including financial institutions, TradeIX and R3.
FF: Marco Polo was all over the news in 2019. Can you please give us a short overview about the Network?
Mirka Skrzypczak (NatWest): Marco Polo is a trade finance network based on distributed ledger technology. All members part of the trading transaction subscribe to the same data flows, changing something that we’ve been trying to break for so many decades which is silos in trades.
This new partnership is a fantastic example of how through the same network we can bring partners such as Mastercard, NatWest and other banks, as well as parties from the wider trade ecosystem such as logistic companies to the same table with new synergies and opportunities being created for corporate clients.
This is no longer an approach where a bank can only care about providing financing to its customer base. By joining the Marco Polo Network, I want to create a holistic customer experience for my customers and their trading partners.
As Claire says, B2B customer expectations are changing. The difference is so massive between B2C and B2B transactions that we need to start working together to close that gap. And I think this is a fantastic example of how collaboration using distributed ledger technology can start leading into those seamless experiences for our customer base.
FF: What is the main role of the Marco Polo Network?
Nicholas Barnes (TradeIX): From my perspective, the role of the Marco Polo Network is an open, distributed trade platform that allows parties to connect and transact across many different trade orchestrations, be it based on traditional trade finance facilities and risk mitigation solutions or new processes we may not be able to think of yet.
By ‘connecting once to connect to many’, Marco Polo reduces friction for members to join, integrate and transact across the network.
FF: What would be Mastercard Track’s role in this?
Claire Thompson (Mastercard): It is the ability to be digitally connected across multiple platforms, which is a huge step forward. Once you are connected, the question is what is an adhesive way that the players can actually interlock. That’s one of the key assets that Mastercard is bringing to the Marco Polo Network, which is creating a trusted digital identity for businesses through one of our core solutions, Mastercard Track.
Mastercard Track is what I would describe as the gateway to Mastercard’s B2B digital assets and to its network. Within Mastercard Track, the trade directory has around 210 million business identities, which allows clients to identity trading parties and interoperate across the whole market.
For corporates, it means they can overcome the obstacles of having to onboard multiple times to different platforms. They just have to be onboarded once to access the entire network. And with rich data we create trust around the identity, consistently refreshing the information and making sure it’s current and relevant.
Mirka Skrzypczak (NatWest): It’s also to get into actual practical use cases. A corporate that leverages Mastercard Track via the Marco Polo Platform can consume the service from its own environment, such as the ERP system and coordinate with procurement when they onboard their suppliers or when they deal with their customers. And because they are already joining the Network through that gateway, they are then able to start exploring other trade orchestrations offered on the Marco Polo platform such as Receivable Financing or Payment Commitment.
So corporates can start interacting with this network of partners and solutions from a myriad of different gateways. And this is a proper network rather than a destination platform that tries to lock members into specific platforms, thus creating siloed trade islands. I think the multi-channel aspect of the Marco Polo Network is definitely one of its key strengths.
FF: How is the current B2B trade finance process being managed today? What are the current challenges that are addressed by this new partnership?
Mirka Skrzypczak (NatWest): Today’s trade processes vary very significantly depending whether they are based on open accounts or are dealing with traditional trade.
If we look purely at supply chain finance (open account trade), we can see how Mastercard Track can start enhancing supplier onboarding from a corporate and bank perspective
Even before the bank is being introduced to the supplier, the supplier is already onboarded and part of the network backed by secured information. The information on Mastercard Track can build trust for financial institutions, allowing them to offer trade finance solutions much faster and more efficiently to corporate clients.
And even if the bank still needs to perform its own checks, they don’t need to ask the supplier to provide the information again because they can analyse what has been provided by Mastercard Track. That speeds up the process massively, taking away days of processing in terms of onboarding new parties onto the network.
That means a lot of time saved, but it also means that we can network, grow and adopt new parties and create new opportunities. Because the quicker we
can do that, the quicker the network grows.
Claire Thompson (Mastercard): I think obviously the outcome is being able to trust who you’re trading with, onboarding more quickly and a much better experience for the customer in trade finance.
Another very important point: For too long, the small and medium-sized enterprises (SMEs) have been left out of the whole trade financing market. By increasing trust, visibility and efficiency through the partnership between Mastercard Track and the Marco Polo Network, we can create a real level of financial inclusion for SMEs.
Nicholas Barnes (TradeIX): I agree on Claire’s point. We know how burdensome administrative costs are in trade finance today. By connecting to the Marco Polo Network and its members, as well as utilising the various trade orchestrations, there is the ability to reduce this burden. And at the same time, we will be able to remove the barriers in trade finance, which have resulted in low take-up among SMEs and long-tail suppliers.
From my perspective, it’s all about the ability to remove these barriers, reduce the costs and complexity of financing trade, removing the multiple onboarding processes involved in trade and being open to prevent another siloed network.
FF: When will Mastercard Track be available on the Marco Polo Platform and what geographies and type of clients will you be focusing on?
Nicholas Barnes (TradeIX): The Marco Polo Network and its offering is multi-jurisdictional. You can see it by the geographic distribution of its members. It is open for participants across all sectors including financial services and service providers like B2B networks. And in terms of timing, we are aiming to connect the platforms in the first half of this year.
Claire Thompson (Mastercard): Mastercard Track focuses on over 210 million business identities and the data spans across 170 countries. In terms of availability, it is clearly going to be US, Europe and the key trading hubs across the Middle East and Asia Pacific.
FF: What do you think would be the biggest obstacles regarding the uptake and what are your solutions around it?
Claire Thompson (Mastercard): I think it is important that whether as a participant or as a provider within the network, each member is open to collaborate and keeps an open mindset, especially around innovation. That’s the fundamentals of how the network will continue to grow and interoperate.
I think the benefits will basically speak for themselves in the context of managing efficient onboarding, including SME trading partners as well as, facilitating the accessibility to the network, reducing the friction and offering multiple trade finance orchestrations.
Mirka Skrzypczak (NatWest): I think for me it’s education as it requires a bit more understanding when it comes to the underlying technology that is powering the solution. Because it’s based on distributed ledger technology, we will have to embrace various aspects that are pertinent to the technology.
If people just focus on the trade solution and ignore the ways how this solution needs to be implemented, you are potentially hitting substantial obstacles as these new technologies require a new deployment approach. And deployment of distributed ledger technology can be easy if you consider everything else around it.
For example, understanding how you integrate with something that is changing all the time with things happening on the ledger simultaneously instead of sequential can be challenging. In addition, understanding how you interpret those events and bring them into your own environment also requires education and understanding. If people are trying to be technology agnostic when it comes to distributed ledger technology, they will make mistakes and that can be a hindrance on the future growth and adoption of these new platforms.
Nicholas Barnes (TradeIX): I agree with both points. Today, we spend the majority of our time educating and collaborating amongst the members of Marco Polo Network and other groups. This way of working has become the new default, to be open and have the understanding that there is not one provider nor group that can do everything. There are new ways of doing business and collaborating that are evolving and making use of the solutions that are being created as we speak.
We are very encouraged here by the tremendous amount of support we’ve had between our member banks and having Mastercard onboard creates opportunities for all participants to work towards the common goal of making trade smarter and better connected.
Trade has a very long legacy. It’s a process that has been subjected to old ways of doing business that have just been passed on. This is a great opportunity to develop solutions across a network that will allow us to bring trade to another level moving forward, into what it should be, which is closer to how the consumer space works right now.
FF: What are one or two key takeaways for the FinTech Futures readers?
Claire Thompson (Mastercard): I think what we have today with the Marco Polo Network is the future. I think the networks’ collaboration and mindset working on offering better customer experience for corporate clients is the future of trade finance.
Nicholas Barnes (TradeIX): As the operator of the Marco Polo Network, we are delivering a truly distributed and open trade network. Collaboration will become more and more important for future trade finance and is at the very core of the Marco Polo Network; which is encouraging better solutions to world trade.
Mirka Skrzypczak (NatWest): The future in trade finance is exciting and everybody should watch this space because I’m sure other big names will be joining the network, not only banks but logistic companies and various other added providers. So I think this is only going to get richer and richer.