Strategic Advisory for an Innovative Fintech Wishing to Penetrate the Trade and Supply Chain Finance Sector
This early stage Fintech had developed a solution to a major challenge that exists when replacing paper documents with electronic records – the ability to distinguish between an original and a copy, confirm ownership of the original, enable transfer of possession of the original by delivery and validate authenticity of an electronic record. They believed that their solution could be applicable to the Trade and Supply Chain Finance sector and engaged with Trade Advisory Network to provide deep subject matter expertise to develop practical use cases and to support their penetration into this marketplace.
In the context of trade and supply chain finance, the concept of possession of an original document is vitally important especially when the document is negotiable. Whether a payment instrument such as a bill of exchange or promissory note or a document of title such as a bill of lading or warehouse receipt, the ability to transfer rights through endorsement and delivery are enshrined in law in most jurisdictions across the globe. These laws were drafted and adopted in a paper-based world resulting in legal uncertainty regarding the enforceability of digital versions of negotiable instruments in many markets. The legal challenges have, as a consequence, hampered the well-publicised efforts by the industry to accelerate the adoption of digitalisation.
In an attempt to progress digitalisation, numerous initiatives have been launched including the establishment of several consortia, each bringing together finance providers and trading companies within a closed user group, where all members are required to sign-up to a common contract. This approach avoids the legal uncertainty as the relationships, rights and responsibilities are enshrined in a contract. This requirement is, of course, also a significant obstacle to adoption and creates the additional challenge of enabling interoperability between consortia.
Our client’s digital original document solution replicates the properties of paper documents without the associated disadvantages (inefficiency, susceptibility to fraud and impact on climate change). Requiring no special software (just an internet browser) and no club-membership their solution is open to all and is inherently interoperable.
Their twin challenges were to:
- demonstrate that their solution would deliver the stated benefits (effectiveness, efficiency, certainty, fraud resistance and sustainability) in practical trade and supply chain finance transactions; and,
- address the legal concerns regarding enforceability in markets where this is an issue.
How we helped
Working closely with management, we drafted white papers positioning their proposition within the market, together with use cases applicable to real-world scenarios.
We were able to use our influence and credibility to gain interest with leading trade and supply chain finance associations, as well as with leading banks and organisations to establish cooperation with this client.
We continue to advise the client as members of their advisory board and provide direct support in respect to the development of specific business opportunities.