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.”