January 10, 2020
Global commodity trade finance platform komgo has achieved many milestones since its launch. Made in partnership with ConsenSys and Kaleido: Blockchain Business Cloud., komgo recently channeled over USD 700m of financing by network members last year, rolled out crucial features, and reduced the time to issue a digital letter of credit by 99.58%.
This post highlights the platform’s outstanding timeline and rapid results.
The commodity trade finance market is a 150-year-old industry that is still heavily paper and email-based. Reuters reports that the operation needed to finance and/or mitigate the risks of a trade finance deal for a single commodities cargo by sea could require 36 original documents, 240 copies, and the involvement of as many as 27 parties. Convoluted processes ripe with intermediaries creates friction, and it can often take weeks, if not months, to complete a transaction.
In 2018, 15 shareholders of the world’s largest global banks, trading companies, and oil giants launched komgo, a global network for parties to transact peer to peer on the Ethereum blockchain. Since komgo’s launch, there has been nothing but positive, valuable results.
Figure 1 demonstrates the commodity trade finance’s paper-based system. The buyer and seller agree that the delivery will take place on a specific date and the price and terms of the shipment. Figure 2 displays what happens when you move from paper to digitizing every product connected to the trade and finance industry. Time spent printing, sending, signing, and reentering data into the system is slashed. komgo, leveraging Kaledio: Blockchain Business Cloud creates a common ledger that allows users to operate with a common understanding of the state of transactions without having to give up the control to a third party.
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komgo’s Notable Developments
20 December 2018 – komgo launched in production 4 months after its incorporation
21 December 2018 – The first letter of credit was issued on the platform. This marked a world-first for the commodity trade finance industry.
14 June 2019 – komgo announces two new features: Receivable Discount and Standby Letters of Credit.
16 August 2019 – ING successfully completed its first commodity transaction on komgo. The Geneva branch executed an oil trade deal with a Letter of Credit issued on behalf of Mercuria Energy Trading SA.
September 2019 – TOTSA Total Oil Trading SA joined komgo, the first client to onboard from outside the initial shareholder group.
25 September 2019 – Lloyds Bank became the first UK bank to join komgo.
14 October 2019 – komgo surpassed USD700m of financing on the platform.
23 October 2019 – Rabobank transacted it’s first commodity trade on komgo— a Standby Letter of Credit was issued over the platform for the purchase of biofuel.
99.58% reduction in time to issue a digital letter of credit – from 10 days to 1 hour.
komgo stand-out milestones in 2019
Particularly notable are the most recent three updates.
Global financial institution ING executed its first commodity transaction on komgo.
This transaction stands as a great example of ING’s persistence to innovate the trade ecosystem and improve their client’s experience.
“This is a new chapter for ING to bring innovation to our clients and drive the Komgo platform to become an industry standard.”Patrick Arnaud, Managing Director TCF Oil & Gas at ING
First non-shareholder members join komgo
One year after the launch of komgo, TOTSA Total Oil Trading SA emerged as the first client to onboard from outside the initial shareholder group, and Lloyds bank followed shortly thereafter to issue letters of credit.
Managing Director and global head of trade for Lloyds, Gwynne Master, outlined the cumbersome and time-consuming characteristics of current international trade as a catalyst for the bank to join komgo.
“The process of trading a single commodity can take over 100 days, involves many players, considerable paperwork, and risk. Trade is particularly onerous for our commodities clients, where faster turnaround times and a streamlined channel are key requirements.”
“Our partnership with komgo helps us tackle these challenges. We’re working together to shorten the time it takes our corporate clients to trade internationally by significantly streamlining and digitising the process.”Gwynne Master, Managing Director and global head of trade for Lloyds Bank
By far, the most monumental achievement of 2019 was the commodity trade finance platform’s stand out metrics. komgo reports a 99.58% reduction in time to issue a digital letter of credit – down from 10 days to 1 hour. Additionally, komgo channeled over USD 700m of financing on the network, and in mid-October.
These achievements demonstrate the industry’s desire to move to simpler and more collaborative business relationships, and the benefits of transacting peer to peer due to blockchain technology. We anticipate more exciting updates in 2020!
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