From Beta to Beyond: Trade Finance Blockchain Platform ‘Contour’ is Live

From Beta to Beyond: Trade Finance Blockchain Platform ‘Contour’ is Live

October 6, 2020

Contour, the blockchain trade finance initiative owned by eight major banks– Bangkok Bank, BNP Paribas, CTBC, HSBC, ING, Standard Chartered, SEB and Citi–has officially left its beta phase.

GT Review (GTR) reported that the platform, which was previously known as Voltron or Letter of Credit (LoC) blockchain, is said to act as a DLT-based global network for trade finance.

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Bringing blockchain to the world of trade finance

The move beyond beta is Contour’s latest step on the race to bring a workable blockchain platform to trade finance.

However, according to GTR, this “race to bring trade finance into the digital age” has caused the formation of a number of fragmented platforms into the the trade finance space.

This resulted in some concerns: many in the industry expressed worries that no single platform would reach the critical mass necessary to be truly transformative–or even truly functional–for the industry as a whole.

The ability to gain widespread adoption in the trade finance industry is what Contour’s shareholder banks are betting on.

“I am struggling to think of another platform that has got so many banks onboard across different corridors and clients that have already undertaken live transactions and seen the value from it,” said Vinay Mendonca, global head of product, propositions and structuring, trade and receivables finance at member bank HSBC, to GTR.

“So, for us, there is the necessary catchment and foundation to drive scale.”

Mendonca also commented that HSBC now plans to move all of its regular documentary credit clients onto the network, and is asking its financial institution clients to join the platform as well–particularly in large markets such as India, Bangladesh, and Vietnam.

The journey to beta and beyond

After launching as a prototype application on R3’s Corda in 2017, the platform premiered at Sibos in Sydney before undergoing testing by 80 banks and corporates, with trials in 17 countries across a number of industries. Contour gained status as a standalone legal entity at the beginning of this year.

Carl Wegner, CEO of Contour, told GTR that the testing process was a key part of the move out of its beta phase: “every time we did a transaction, we carried out a review, and we have been taking on all those inputs and learning from them,” he said.

Addressing legal challenges

However, there have been challenges along the way: “with banks and corporates initially using Contour to manage the letter of credit (LC) process, one of the key areas of work has been around the legal framework,” Wegner said.

This is particularly true because “although it is technologically possible to execute transactions using negotiable instruments registered via blockchain technology, in many jurisdictions these [transactions] are recognised only if they are on paper and signed, hindering the advancement of many digitisation initiatives.”

To tackle these legal challenges, Contour’s members and pilot testers have developed a rulebook and membership agreement that will be included with the project’s launch. W

Wegner described the rulebook as “robust, but as simple as possible.”

Indeed, HSBC’s Vinay Mendonca told GTR that “the rulebook is really important.”

“Rather than having to string together four or five different legal agreements between buyer, seller, buyer’s banks and seller’s banks, which was very onerous, [the rulebook] makes it very easy for everybody to sign up and know what their roles and responsibilities are.”

Mendonca also said that the rulebook was developed in line with ICC Uniform Customs and Practices (UCP) that are used for documentary credits.

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