Collateral management is not something that
usually sets the pulses racing: it is an arduous, time-consuming, but
necessary, task and one that has traditionally been done manually. This got BNP
Paribas’ Specialised Trade Solutions team thinking: what does a simpler and
less time-consuming collateral management process look like?
The result of an exhaustive co-creation
process involving clients as well as internal colleagues, MyCollat is a web-based
interface drawing on the possibilities of blockchain distributed ledger
technology, designed to simplify collateral management and the sharing of
information for commodity-finance transactions. During an innovation cycle
launched in early 2016, the starting point was BNP Paribas’ Blockchain
Biz’Hackathon in January of that year, leading to the delivery of a successful
prototype, which is now being improved and developed with a view to undergoing
live testing.
Three specialists from Specialised Trade
Solutions offer their insights into why collateral management should now set
your pulses racing.
What is MyCollat and how did it come about?
Jérôme Hayoz, Specialised Trade Solutions
Account Manager, BNP Paribas: The idea behind MyCollat was conceived during the BNP Paribas
Blockchain Biz’Hackathon in January 2016. During the two-day sessions, blockchain
experts and developers, corporate clients and BNP Paribas employees devised and
started designing applications to ease “pain points” in the cash, trade and working
capital finance value chains, making use of the powerful features of blockchain
technology.
Our team focused on the commodities’
trading value chain. The lifecycle of commodities’ trading is complex: each
transaction involves 10 or more stakeholders, who each monitor and track their
position and risk throughout the transaction cycle.
Between a trader and the bank offering a
trade finance solution, a major pain point relates to the sharing of
information on the collateral, i.e. the physical guarantee on the underlying goods
which secures the financing. It is a tedious, time-consuming process, involving
paper-based manual reconciliation. In our team, roughly 45% of an account
manager’s time is spent on checking positions and price, by phone, fax and
email. Some of our trader clients spend roughly the same amount of time
performing the same tasks, which take up an enormous amount of time. Also, due
to information asymmetry, there are risks of dispute.
Our objective was to make the sharing of
collateral valuation painless and less time-consuming. We believe that blockchain
technology can contribute to designing a more efficient process.What is it about blockchain technology that facilitates the sharing of “true information” between different parties?
Ronan Pierre, Specialised Trade Solutions
Programme Director, BNP Paribas: Imagine you have a shared ledger in which you record each
change in the value of your collateral. Your client has access to the same
ledger, and everything you record in the ledger is automatically and almost
immediately visible by the client, and vice-versa. This is the added value of blockchain
in this situation: there’s no need for manual reconciliation, as reconciliation
is performed by the system itself.
MyCollat thus connects the bank and clients
for collateral management. It can also connect other participants in the
commodities’ value chain via the same platform.How did you go about “co-creating” MyCollat with some of your clients?
Chiheb Kourda, Specialised Trade Solutions
Project Manager, BNP Paribas: We started from the perspective that manual collateral
management was a mutual pain point, shared equally by us and our clients. From
this starting point, we immediately sought to integrate our clients’
perspective and business expertise to develop a common understanding of the
goals and process. This enables us to determine that the platform design should
focus on ease of use; it should be intuitive and address the key business needs
of both the bank and its clients.
We placed a specific emphasis on the user’s
experience at every stage: what content a user is viewing, what value content brings and how the primary requirements of the user are satisfied in
the simplest manner.
Based on our clients’ feedback, we rapidly
repeated the process and communicated progress regularly across the team and
with end users. It has been a continuous process of adjustment and amendment.
When the prototype was ready we presented
it to additional clients, and received excellent feedback: they find the
solution simple and easy to use, with useful information and features.
Furthermore, they would like to add more functionality, more business rules and
also connect the platform to their own IT systems.Jérôme, as an account manager in the Specialised Trade Services team, designing new solutions is not your regular job. How do you manage to integrate design, co-creation and development of a new service into your day-to-day activities?
Jérôme: When we started this project, we
felt it was necessary to involve our clients from the outset, not only to
understand and meet their needs, but also to confirm the usefulness and
possible barriers to adopting a new communication/valuation tool. An account manager
seemed to be best placed to instigate a dialogue on an informal basis, and get
regular client feedback: we typically have a close relationship with our
clients as we are in contact with them every day. It is part of my job to
provide solutions to support my clients’ business development.
MyCollat is a huge improvement for all stakeholders,
so it seemed natural for our team to free up resources to develop the project,
and we received excellent support from both our direct managers and management
at the bank. They offered regular feedback and concrete support to solve
problems as they arose and secure the necessary budget during the project’s
development.
Finally,
our way of working allows our small team to work with agility and autonomy.
This was instrumental in enabling us to create MyCollat with our unique touch.
Our very different backgrounds (Business and IT) and complementary skills
offered a good environment to develop our project rapidly.
MyCollat is a promising initiative that will help to rationalise collateral management information flows. This integrated real-time system will enable us to reduce the workload and save time. This is a real benefit to all stakeholders. For us as warehousing specialists, this represents a further step towards improving efficiency vis-à-vis our clients.
William Vinck, Managing Director of Pacorini Global Services GmbH
MyCollat is offering an innovative service for sharing and management of positions with our partners, in real time, thus bringing all the parties involved in a given transaction closer together. This tool, which is highly intuitive and easy to use, provides an effective and efficient response to the issues that our industry has to cope with.“
Nicolas Tamari, CEO of Sucafina