Stockholm-based fintech company Mitigram has revealed a new feature called Open Market Discovery on its marketplace. The tool enables corporates to build new relationships with financial institutions (FIs) to finance and cover exposures that their usual banks and insurers may not be able to service.
Launched in 2015, the Mitigram marketplace allows trade finance players to meet and collaborate on the financing and risk coverage of trade. Banks and insurers are able to bid for corporates’ trade finance business on a transaction-by-transaction basis, while companies can extend their network and compare and accept quotes.
Open Market Discovery enables corporates to identify FIs with a matching risk appetite for particular transactions and invite those counterparties to review them, making it easier for companies to forge new relationships with FIs and strike a deal.
In this interview, GTR speaks to Milena Torciano, CEO of Mitigram, to learn more about the new tool, how the pandemic has made building new relationships between corporates and banks even more important, and how the current crisis has affected the company.
GTR: Tell us about Open Market Discovery.
Torciano: Open Market Discovery is a game changer. It is the first time that corporates are able to build relationships with banks that they do not have a pre-established relationship with on a trade finance marketplace. They can find coverage or funding for certain risks, where their relationship banks are not able to support them. For example, a corporate in Asia can find a bank or insurer in Europe that it does not have a relationship with to price and cover a risk in a different market where it was not able to do so previously. It is all about creating those connections to support global trade.
GTR: Can you explain the technology behind the feature and how it works?
Torciano: The feature is a build-on to what we currently have; it is part of our pricing discovery feature. The technology itself is not revolutionary, but it really leverages the network that we have built over the past four years, which is quite exceptional. It enables counterparties to discuss transactions and review them, with the aim of providing a pricing structure. It is a tool for true collaboration.
If a corporate has a risk in, say, Indonesia, that it could not get cover for from its bank, or if the coverage or pricing is not adequate, it can then put this transaction on the open market and invite a counterparty with a matching risk appetite to review the transaction. It can do this because Open Market Discovery’s algorithm instantly reveals the banks with matching risk appetite. After that, the corporate can select which banks it wants to work with. It is by invitation only – it is never a request that is sent across the entire marketplace. It is the corporate’s decision to select which banks from the open market it would like to invite to review a particular transaction.
At this time, we see significant interest from FIs on the platform around these Open Market Discovery transactions – some of which are very large.GTR: Why do you think integrating something like this is important?
Torciano: There is a substantial gap in trade finance, estimated to be US$1.5tn globally. Covid-19 has given banks liquidity constraints, and, in some cases, they are taking a de-risking approach, whereby they are not willing to take on certain risks. Meanwhile corporates need to ensure that goods keep flowing and that they can get their business done. Right now, they need coverage for transactions.
GTR: How has the pandemic impacted Mitigram – have you had more requests on the platform?
Torciano: When the pandemic hit and the world went into lockdown in March/April, we certainly saw a sharp reduction in flows on the marketplace. This was simply because ships were not leaving ports. Things have recovered significantly since then; we had a strong rebound in May, seeing continuous growth through the summer. We think our marketplace has proven resilient. The number of requests sent through the platform has never been higher, and our user base continues to increase. We have recently onboarded our first corporates and banks in South Korea, which is hopefully the beginning of a significant expansion into East Asia.
The need for market participants to digitise is now very apparent. Our platform keeps growing despite the current market conditions, strengthening our conviction that there is a true need for Mitigram in the market. We aim to continue to grow at a high pace across all major trade corridors.