Automotive Giant Daimler Completes Transaction on Marco Polo Blockchain Network

Automotive group Daimler has just executed its first transaction on the international blockchain-based Marco Polo trade finance network, according to a press release on Wednesday. The Marco Polo network has proven its capability for practical use with this pilot transaction between these two top industrial corporates.

Founded by startups R3 and TradeIX, Marco Polo is built on R3’s Corda blockchain platform. The network focuses on delivering real-time connectivity, improving transparency in trading relationships as well as reducing hurdles to accessing capital.

Automotive group Daimler AG and engineering firm and machine builder Dürr AG digitally processed the data transfer to secure payments from a commercial trade transaction on this platform, using Corda blockchain technology. German bank Landesbank Baden-Württemberg (LBBW) – a founding member of Marco Polo – provided the financing and the payment commitment.

Generally, the process of securing payments from foreign commercial trade transactions with traditional instruments is rather complex and time-consuming. This is due to the use of different systems as well as a large number of intermediaries: for instance logistics providers, insurers, customs authorities. Substituting the paper based system with a blockchain-based networks facilitates the process and boosts transparency. Assisted by distributed ledger technology (DLT), such processes can be accomplished within minutes instead of days.

According to the announcement, the fact that this process can be streamlined and made faster and simpler is what convinced both Dürr und Daimler to go through with the pilot project.

The successful trade transaction involved an order and delivery agreement for a balancing system from Dürr subsidiary Schenck via the Marco Polo network. Payment was secured by a conditional payment commitment by Daimler’s bank.

As soon as the ordered equipment was delivered, the related order fulfillment data was uploaded onto the network and automatically reconciled with the previously agreed transaction data, thus triggering an irrevocable payment obligation.

Jürgen Vogt, director treasury controlling, analytics & standards of Daimler AG has expressed in a statement that the company is continuously working on the digitization of their business processes. He strongly believes that the optimization potential inherent in trade finance transactions is high.

Susanne Schlegel, CFO of Schenck and Dürr Division Measuring and Process Systems has also stated:

“We focus on efficiency increases not only with regard to our machines and systems, but also to our business processes. The successful pilot project between Daimler and LBBW demonstrates the intrinsic efficiency potential of digital trade finance processes. Innovative platforms and technologies such as Marco Polo and Corda allow us to reduce complexities in order fulfillment – to the benefit of all participants.”

As for LBBW, which joined the Marco Polo network as a founding member last year, this was already the third pilot transaction via Marco Polo, following the two previous business deals with industry partners Voith and KSB.

Matthias Heuser, head of international trade and payment solutions of LBBW, explained that it is the institution’s goal to collect practical experience with such innovative technology as well as further advance the development of a trade finance ecosystem based on DLT.

He further stated:  “For the first time in this transaction, we successfully tested the complete execution in the bank’s management systems – this is an important step towards reaching full production maturity. The excellent cooperation with two major, internationally active companies with highly sophisticated technology know-how was key to the success.”

Commerzbank Collaborates with Daimler On Machine-to-Machine Payments

Commerzbank, the second-largest bank in Germany, is reportedly exploring a blockchain-based machine to machine payments solution using Daimler trucks, according to an announcement on August 8.

The pilot project has already completed its first testing, where it involved the exchange and settlement of payments between an electronic charging point and a Daimler Truck system without any human intervention. For the transaction, Commerzbank issued Euros on a blockchain and provided Daimler Trucks with ‘cash on ledger’ to process the payment.

Commerzbank’s payments processing uses the Corda blockchain, which is the same technology that has been used by the bank for many of its blockchain initiatives.

Following the testing, it has been determined that both charging and subsequent payments can be processed fully automatically. According to the bank “independent communication and interaction between machines is happening, this also enables the settlement of mutual payments.”

Meanwhile, the system is aimed at a new generation of interconnected machinery capable of operating with surging degrees of autonomy. Stephan Müller – divisional board member transaction banking Commerzbank – explained that the this new system can lead to significant efficiency gains in logistics chains, which could further amplify as vehicle automation increases.

 “After having completely digitised securities transactions in past pilot projects, the focus is now shifting to DLT-based payment structures. […] As a bank we see our mandate as creating new digital payment architectures for our clients.”

He adds that further development steps for blockchain-based payment processing in other sectors such as the chemicals, manufacturing and real estate sectors, are being currently explored.

The new system has been granted regulatory approval from the German Federal Financial Supervisory Authority (BaFin).

On the other hand, Dr Helge Königs, head of the Truck Wallet project at Daimler Trucks, has elaborated on several applications for this new payment system, including how it can prevent fraud. He stated that “this renders it practically impossible to carry out such things as fuel card scams whereby criminals copy a fuel card and spy on the PIN number being entered.”

He further added that in the future using automated payments will enable drivers to focus on other tasks, and will ultimately reduce the need for reconciliation because all the transactions will be on a distributed ledger.

The giant automobile company has noted that the Daimler Truck ID and Truck Wallet are still in the prototype phase. Other potential applications include processing tolls, transmitting freight papers, potentially controlling and billing subcontractor drivers, and processing pay-per-use vehicle leasing.

This is not the first time that both Commerzbank and Daimler have ventured into the blockchain technology.

Earlier this year, the bank executed commercial transactions through trade finance blockchain Marco Polo, as well as processed a commercial paper transaction in minutes rather than days, thanks to the technology.

In addition to that, it had executed two money market tests, one with Deutsche Börse and another with Siemens and Continental. The bank is currently working with the German innovation group Fraunhofer IML to explore the future of exports and trade finance.

Prior to this news, it had been reported in July that Daimer partnered with European blockchain interface solutions startup Riddle & Code to provide an open car hardware wallet solution.