The value of transparency in digital trade finance, with Aaron Seabrook, COO, Contour
Following the recent announcement of the partnership between GLEIF and digital trade finance network Contour, GLEIF spoke to Aaron Seabrook, Contour’s COO, to find out why digital identity is so important to the future of global trade.
In the globalized digital economy, verifying trading partners’ identities is becoming more complex and costly by the month. GLEIF data has shown that 50% of financial institutions use an average of four different identifiers to verify each client organization. Individual organizations that lack both the verification skills and the resources of financial institutions have an even harder time.
In November 2021, GLEIF partnered with Contour, a global network of banks, corporates and trade partners working together to revolutionize the trade finance industry by removing barriers to entry. The partnership enables the use of Legal Entity Identifiers (LEIs) within Contour’s platform and puts digital identity at the heart of the offering.
GLEIF spoke to Aaron Seabrook, Contour’s COO, about the partnership and why digital identity is such an important component in creating more accessible trade networks.
What challenges do Contour’s customers often face when trying to verify the identity of potential trading partners?
When companies build relationships with new suppliers, it is an important step to make sure they are who they say they are. We have heard from our affiliates that supplier verification processes are fragmented and inconsistently applied, particularly following the business disruption caused by the Covid 19 pandemic. Establishing the identity of a new supplier is usually a manual process, which is obviously very inefficient: it is prone to human error, is difficult to align with business growth and is very time-consuming.
Why did Contour decide to partner with GLEIF?
Contour’s vision is to create a better world for businesses by making global commerce accessible, digital and secure. The goal of our platform is to simplify financial workflows between banks and businesses and enable seamless, real-time collaboration. In this way, we hope to reduce complexity and optimize efficiency for all parties involved.
As we have expanded the platform, we have encountered some challenges in engaging new member organizations. Some have multiple connections to different networks where they may be registered under a slightly different name, others register with us through a holding company and use a trading company to register with others. When we try to put this information together, mistakes happen because we rely on manual processes. Digital systems need structure, and that’s why we chose a unique identification system for our platform.
We chose LEI because it is a well-regulated and widely accepted global standard.
How will Contour’s customers benefit from access to LEI under this new partnership?
The LEI will become a central part of Contour’s onboarding system through our new role as registrar. When an organization joins Contour, it goes through our automated onboarding system. As part of this system, we will now also check whether the organization has an LEI. If not, we will not only register them, but also cover the costs.
The LEI will not only enhance the customer experience of our users within Contour, but will also have a significant impact on their overall digital commerce journey. Our members have numerous connections within different networks. With an LEI, a company’s legal credentials are electronically available to anyone, anywhere, for free – they can be universally validated. In international trade and trade finance, this creates greater trust between trading partners, leading to a more transparent and efficient cross-border exchange of goods and data. In addition, the LEI will also reduce data reconciliation costs, reduce transaction discrepancies and improve risk management for all our clients.
From the first day they join Contour, our members will be in possession of a globally recognized digital identifier that can be used not only within Contour but also in other international systems. This will help them to reap the benefits of digitalization more quickly.
What long-term potential do you see for ID initiatives like the LEI for global trade?
We believe that LEI holds enormous potential for global trade. As part of our vision to make trade accessible and inclusive for all, this means giving businesses large and small the tools to improve their access to trade finance. The LEI enables SMEs in developed and developing countries to quickly legitimize themselves through a native digital identity that is recognized globally.
Data from GLEIF and McKinsey shows that banks providing trade finance could save up to $500 million each year just by using the LEI for letters of credit. So the potential for savings throughout the KYC process is huge. Banks could also have an incentive to lend to a wider range of businesses of all sizes if those borrowers could offer a globally recognized and validated form of corporate identity.
Companies with LEIs are also more likely to be able to agree credit terms with international supply chain partners, creating further opportunities for global economic growth.
The impact that can result from providing companies with LEIs is remarkable. We want to ensure that Contour plays a key role in enforcing LEIs as a de facto identifier for legal entities, by continuing to advocate for industry adoption.
A fairer, more open and efficient international trade ecosystem is on the horizon.
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