Fintech-enabled fund manager TradeFlow Capital Management has partnered with global freight market information and other maritime services provider, Baltic Exchange, to successfully execute a pilot escrow transaction as part of a commodity trade executed through TradeFlow.

This type of digital escrow transaction is expected to benefit small- and medium-sized enterprises (SMEs) that typically find it difficult to access traditional trade financing instruments such as letters of credit (L/Cs) that guarantee goods are delivered to the buyer and the seller receives payment.

Transaction details

The transaction involved a shipment of agri-commodities from an Indian seller to a buyer in China.

TradeFlow facilitated export financing by providing funds for the transaction while the Baltic Exchange, which runs an independent escrow service, held the funds on behalf of the counterparties in dedicated escrow bank accounts.

The transaction involved fast and secure digital exchange of ownership of physical commodities and payment, thus speeding up a process that traditionally takes several days.

Benefits for SMEs

The service will initially focus on the underserved segment of SMEs operating in the bulk commodity markets according to TradeFlow.

It hopes the pilot transaction will pave the way for greater adoption of technologies and escrow processes that will reduce paperwork, minimise transaction times, and improve the overall efficiency of commodity trades.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.