Blockchain-based trade finance is coming to Russia and Germany

Blockchain-based finance platform Marco Polo is ready for its first trade deal between Russia and Germany.

The pilot transaction includes the Russian steel company Novolipetsk and the German metals engineering corporation Vesuvius GmbH. The banks that will also participate are Russia’s Alfa-Bank and Commerzbank from Germany. 

Marco Polo announced the operation on October 11. The financial transaction will be completed using distributed ledger technology (DLT). 

A brief history of the Marco Polo blockchain

The Marco Polo Network is a trade and working capital finance platform that provides open enterprise software for corporations and banks. It’s a blockchain-based solution that streamlines transactions and offers extra security for organisations that use the system to trade data and assets. 

The platform was launched in 2017 by R3 and TradeIX. Currently, it has partnerships with more than 20 banks worldwide. Some of its most important partner members are Bank of America, ING, Commerzbank, Danske Bank, Alfa-Bank, Bangkok Bank, and Anglo-Gulf Trade Bank. 

Marco Polo claims to be the largest and fastest-growing platform in the industry and aims to replace the existing traditional trading methods. The blockchain-based network also proposes improving the efficiency of digital verification of data. This could eventually eliminate paper-based documentation from trade finance. 

The company has been developing blockchain-based trade services with excellent results. Earlier this year, the Marco Polo Network made it possible for a third party to join a trade and trigger a payment to a supplier in real-time. When goods are sent to the client, the third-party releases the money immediately, speeding up cash flow.  

The pilot transaction between Russia and Germany is different because it adds a fourth organisation to the exchange. This step makes it easier for companies to perform trading operations with blockchain technology, as many of them rely on more than one bank for support. Commerzbank took part in Marco Polo’s previous pilot, and now it seems ready to be in the front line once again.  

How blockchain can revolutionise trade finance

Marco Polo’s blockchain-based solution makes transactions quicker, with benefits for all players involved in a trade. At the same time, blockchain technology increases transparency and optimises financing services.  

Thanks to distributed ledger technology, the platform brings all companies in one place. Suppliers, manufacturers, banks, and other financial organisations that facilitate payments get all the information they need from a unique source – an immutable ledger. 

The blockchain creates an environment in which parties can share data and connect faster and more securely. Companies can process purchases and initiate payments in less time, boosting efficiency and increasing cash balances. 

Blockchain-based trade finance could help counter a lack of liquidity – an issue that often reduces growth prospects for organisations. The solution is far more effective than traditional finance systems that rely heavily on paper-based documentation and inefficient processes. 

Networks like Marco Polo enable users to build customised solutions on top of the blockchain and integrate the technology with their existing systems. This way, companies can eliminate a single point of failure and gain more overall control of their data.   

Blockchain-based solutions for trade finance could disrupt a global market that is worth billions of dollars. Estimates even predict that global trade flows could reach as much as $24 trillion by 2026.

Despite the size of the market, data in this area is hard to come by. This lack of data often keeps companies and policy-makers from making educated, timely decisions. Blockchain technology could change trade finance and increase efficiency across all sectors.  

Partners with experience in blockchain technology

The cross-border payment project is Marco Polo’s first import-export operation between Russia and Germany. For the pilot transaction between Novolipetsk and Vesuvius, the platform chose companies that had previously implemented blockchain-based projects. All the parties included in the purchase were already familiar with the new technology. 

Alfa-Bank is one of Russia’s largest banks, while Novolipetsk is the largest steelmaker in the country and one of the most influential companies in this industry worldwide. Both are active advocates of blockchain technology in Russia. 

On top of that, Commerzbank already has a history with the Marco Polo Network. The German engineering firm Vesuvius is an established company in the industry and blockchain area as well. 

It seems as if Marco Polo has prepared its next move well. This could turn into a significant milestone for commercial blockchain.