What is Payment Commitment?

Payment Commitment is a trade finance instrument used to secure payments against the successful matching of trade data. Payment Commitment is an irrevocable and independent undertaking of an obligor (buyer/importer) or its bank to pay at maturity a specified amount to a recipient (seller/exporter) bank following submission of data sets resulting in a successful data match.

Payment Commitment combines some of the features of a Documentary Credit such as Letter of Credit but with the intention to meet the needs of Open Account trade transactions. As a conditional payment mechanism, it can be issued to make payments, based on the irrevocable undertaking of the obligor bank towards the recipient bank. The matching of trade data on the Marco Polo Platform triggers the irrevocable undertaking.

 

Challenges for Existing Solutions

Today, same sets of data are replicated multiple times between parties with each one keeping data in their own trade and general ledger systems. Communication between parties is conducted via SWIFT messages, emails and paper documents throughout the trade finance process life-cycle events. This creates time lags and data becoming inconsistent and erroneous.

Payment Commitment by Marco Polo

With the Payment Commitment solution, a single source of trusted data is shared to which all the permissioned parties have access via the Marco Polo Network. It reflects the real-time state of that trade instrument, terms, payment commitments and life-cycle activities. The solution allows parties to transact digitally, to create and manage workflows, rules as well as business logic to automate the matching of purchase orders and invoices.

Corda Blockchain Technology from R3 provides the underlying network to realize this solution. Corda provides a trusted source of data visibility to all authorized parties, one common view of the trade instrument’s terms, payment commitments, life-cycle events and support for real-time processing between the transaction parties.

 

 

 

The Payment Commitment solution offered on the Marco Polo Network eliminates the challenges faced by current solutions and makes a more secure, cheaper, easier, and a more efficient way for trading partners and financial institutions to transact.

The Payment Commitment leverages blockchain technology from R3 ensuring faster assured payments by preventing disputes arising from contract ambiguities, through early discovery of discrepancies and automated matching of trade data.

The consensus mechanism within the Marco Polo Network ensures there is only one single final version of the underlying trade and finance data at any given time and that all parties are able to view and work on this version based on their access rights.

The whole process is based on digitized workflows replacing paper-based trade documents substantially reducing time and cost.

The Marco Polo Network is fully open, giving access to any financial institution and their corporate clients as well as B2B networks and other constituents of the wider trade ecosystem.

Option to access the Marco Polo Network via ERP-embedded App (available in the near future). The Payment Commitment solution has been tested successfully by various banks and their corporate clients

Tested successfully by leading organisations to meet financial institutions and corporates’ needs

Marco Polo Network: Collaborative by Essence

Experienced trade finance and technology professionals launched the Marco Polo Network project. It is the embodiment of a shared will and vision to take global trade to the next level.

The initiative brings together banks, non-bank funders, corporate organisations from various sectors as well as technology providers, logistics companies, insurers and other value-added providers from across the wider trade ecosystem. Together, we’re collaborating to shape the network and drive it forward.

The Marco Polo Network allows members to mutualise their R&D investments in trade finance and blockchain and provides participants with the optimum environment to research, create, and test such innovations so that advancements can be a benefit to their customers and partners, at scale and for a low marginal cost