EBRD and QNB ALAHLI accelerate trade finance digitalisation with a trial of Contour digital trade finance network with integrated CargoX Platform

(London - 24 February 2022) - The CargoX Platform for Blockchain Document Transfer (BDT) was used in three test transfers of letters of credit on the digital trade finance network Contour, conducted by the European Bank for Reconstruction and Development (EBRD) and QNB ALAHLI, one of the largest commercial banks in Egypt. The EBRD has designated digitalization as one of three priorities for the next five-year framework. 

Processing large amounts of paper-based documents, as required by a letter of credit in global trade, is slow, cumbersome, and can result in delays. The performance of the exporter and importer is tied to the documents requested in a letter of credit. 

The payment is transferred after the buyer’s bank requests the document from the seller and verifies that the submitted documents are in compliance with the documentary credit terms set by the buyer, and the rules of the letter of credit. This can include a commercial invoice, a bill of lading, a packing list, a certificate of origin, an inspection certificate, an insurance certificate, a health certificate or a phytosanitary certificate, a consular invoice, a draft or bill of exchange, and other documents.

Carl Wegner, CEO, Contour, said: “Transforming trade finance can’t be achieved by a single company acting by itself – collaboration is central to building a trade finance network that is truly global. Bills of lading can be a challenge for digital transformation due to their complex nature. That is why it is a key focus for our partnerships to streamline this common pain point in collaboration with CargoX. The tests conducted are important milestones towards facilitating the emergence of fully digital trade finance for all participants in global trade.”

Stefan Kukman, CEO, CargoX, said: ”CargoX offers a reliable, immutable, confidential, and at the same time transparent blockchain-based solution for transferring and presenting trade documents with the highest level of security in global trade. We are convinced that global trade will embrace the digitalization opportunities at hand to streamline document processing, avoid delays, and improve visibility in document processing. We are working towards taking the burden of sending paper around the globe off the shoulders of every major player in global business.”

EBRD - a path to total digitalization

“The EBRD has designated digitalisation as one of three main priorities under its current five-year Strategic and Capital Framework. As part of this approach, the EBRD is partnering with digital solution providers and banks to support digitalisation in trade finance in and beyond the economies where it operates,” said the official statement of the EBRD.

“In addition, the EBRD is working with the International Chamber of Commerce, through its Banking Commission, and the International Trade and Forfaiting Association to advance the adoption of legal frameworks to enable digital trade and trade finance.”

Heike Harmgart, EBRD Managing Director, Southern and Eastern Mediterranean, said: “We are proud to be part of the digital transformation in Egypt by facilitating these test transactions made by QNB ALAHLI on Contour. New digital technologies will make trade and trade finance processes easier, faster, and more effective, supporting the country’s goal to become a regional and international hub for transport and logistics.”

Mohamed Bedeir, QNB ALAHLI’s Chief Executive Officer, said: “Digital trade can play one of the most vital roles in the global economic recovery from the coronavirus pandemic. At QNB ALAHLI we believe in strategically addressing new and sustainable business models that embrace emerging technologies such as blockchain and artificial intelligence that are expected to enhance the trade landscape in the very near future, and significantly improve customers’ experience. It gives us great pleasure to collaborate with the EBRD, Contour, and CargoX in this interesting project which meets our mutual objectives.”

How does it work?

In these specific test cases, prior to the letter of credit (LC) issuance on Contour, all parties agreed to use the CargoX Platform for Blockchain Document Transfer (BDT) to electronically present the documents, with the QNB ALAHLI bank acting as the issuing bank. 

In the real use case scenario, the steps were as follows:

1. Applicant (Buyer) opens a new e-LC on the Contour network, and during the issuing of e-LC nominates the source of documents (CargoX).

2. The e-LC is handled between the buyer, issuing bank, nominated bank, and seller on the Contour network. Here, the e-LC application was sent to QNB ALAHLI for issuance on Contour.

3. At the point of the LC process, when documents need to be presented to the nominated bank, the beneficiary (Seller) transfers the eBL to the confirming bank through the CargoX Platform, integrated into the Contour network.

   • The ocean carrier issues the eBL and transfers the document to the seller.

   • The seller receives the eBL and holds it until it presents it electronically to the bank vs the LC.

4. After the nominated bank verifies the documents, it transfers the documents to the Issuing bank through the Contour and CargoX Platforms concurrently before being forwarded to QNB ALAHLI.

5. The issuing bank verifies the documents vs the LC, sets the payment date in the Contour system and transfers the eBL to the Buyer through the CargoX Platform.

6. The buyer transfers the document to the ocean carrier for accomplishment and cargo release through the CargoX Platform.

Original news source: EBRD