Bank Frick acquired trade finance Fintech Tradico. Considering that trade finance is a major blockchain use case, Bank Frick might be working on a blockchain-based trade finance solution.
In early June, Bank Frick acquired Tradico, a Liechtenstein-based trade finance startup. According to Bank Frick, the purpose of the acquisition was to build up the bank’s offerings of trade finance solutions.
Bank Frick’s Melanie Mündle explains, “Tradico offers a very efficient alternative to traditional bank loans. […] The acquisition of the Fintech firm enables us to access an innovative technological solution so we can strategically expand the bank’s financing business.”
Blockchain in trade finance is one of the hottest banking trends right now. Considering Bank Frick’s expertise in the blockchain space, it’s likely the bank has been looking at this use case before the acquisition of Tradico.
Current trade finance solutions are inefficient
Trade finance is an umbrella term for financing instruments that facilitate international trade. The goal is to reduce financial risks by aligning the different needs of trade parties.
A common solution is a letter of credit, which the importer’s bank provides to the exporter’s bank. This letter guarantees the payment once the exporter presents documents to prove the shipment has occurred, for example a bill of lending. Once the goods are shipped, the bank will release the payment. Thus, the supplier can eliminate the risk of non-payment.
Current trade finance solutions are vastly inefficient. According to GT Review, a trade finance deal for one commodities cardo shipment can require up to 36 original documents and 240 copies from 27 different parties. As transactions are overly complicated, it often takes weeks, sometimes even months to complete a single transaction.
That’s why trade finance is a major field of application for blockchain technology. Increased transparency enables trade parties to settle transactions faster and at a lower cost while improving risk management and eliminating bureaucracy.
Blockchain-based trade finance allows for real-time monitoring and exchange of documents in a digital manner. Instead of using banks’ letters of credit, a smart contract can ensure deposits are being released automatically once contract conditions have been met.
Bank Frick can leverage its blockchain expertise and Tradico’s customer base
Consulting firm Bain & Company estimates that blockchain-based trade finance could increase the profits of the banking industry by $1-3 billion per annum. It could also significantly increase global trade volumes and the speed of trade. Besides increased revenues, banks can also cut costs, enhance the client experience, and improve their credit risk management.
Over the past years, Bank Frick has gained a reputation as a blockchain banking pioneer and has launched several innovative products and platforms. Tradico provides its clients with trade financing solutions for purchases and sales of tradable goods, without having to use a bank. Since it was founded in 2015, the company has achieved a turnover of EUR 60m, and its core customer base is in Germany.
Thus, Bank Frick could leverage its blockchain expertise and Tradico’s trade finance experience and customer base to develop a blockchain-based trade finance solution. Considering the enormous opportunities the technology provides in this sector, it wouldn’t be surprising if Bank Frick is going to launch such a product soon.
Image: ©Bank Frick