Lloyds, Mercore Complete Digital Trade Finance Milestone
Lloyds Bank and Mercore, a non-bank trade finance provider, have completed a series of digital transactions featuring the secondary participation in an accepted digital bill of exchange (DBE), a development that could reshape how secondary market trade finance operates.
The landmark transactions demonstrate how financial institutions can support clients' working capital management by reducing deal completion times from days to hours, potentially unlocking additional liquidity in the market.
The trades involved sugar shipments from Central America to the UK, underpinned by a DBE drawn by the exporter and accepted by the importer.
On confirmation of acceptance by Lloyds Bank, Mercore funded the transaction against the DBE, with Lloyds participating in the transaction from Mercore under a Master Participation Agreement.
Digital transformation in secondary markets
Traditionally, secondary purchases of bills of exchange in trade finance have relied on physical paper instruments being transferred between parties, a process that can take days to complete.
These transactions demonstrate the feasibility of using digital negotiable instruments (DNIs) - electronic versions of traditional paper documents like bills of exchange that can be legally transferred between parties - in the secondary market.
Surath Sengupta, Head of Trade and Working Capital for Lloyds, says: “Our investment in trade innovation is continually unlocking new and impactful solutions to support our clients' trading ambitions.
“We have previously showcased digital flows for primary transactions, and this latest trade is a great example of our technological solutions in action in the secondary market space.
“Combined with continued uptick in the use of digital negotiable instruments to deliver trade financing, a vibrant digital secondary market could help extend the funding of cross-border trade, helping more businesses around the world trade more efficiently,” Surath adds.
Collaboration driving financial inclusion
The transaction highlights how collaboration between traditional banking institutions and newer financial service providers can expand access to trade finance.
Anthony Wadsworth-Hill, Co-founder and Deputy CEO at Mercore, says: “This type of secondary market collaboration between Mercore, as a non-bank lender, and a relationship bank, like Lloyds, is key to driving improved financial inclusion for aspiring businesses.
“By combining Mercore's and Lloyds' respective areas of client coverage, while leveraging the benefits of digital innovation, we are able to improve the amount of financing available, and the speed of funding for both new and existing commercial trade flows,” Anthony explains.
The transactions were completed using trace, a solution developed by Enigio, a technology company specialising in digital documentation.
Alex Waites, Executive Director at Enigio, describes the development as “a true testament to Lloyds' and Mercore's commitment to advancing digital trade not in theory but through live, impactful transactions.”
Building on previous innovations
This development follows other transactions completed by Lloyds and Mercore in October 2024, which were the first under the International Trade and Forfaiting Association's (ITFA) Digital Negotiable Instrument initiative to feature a node-to-node transfer of a digital trade document between two financial institutions.
Those transactions were also the first to involve the handling of a DNI between two financial institutions each facing off to an importer or exporter, known as "Four-Corner" transactions in trade finance terminology.
The Enigio trace solution removes the need to physically transfer paper negotiable instruments by enabling the creation of digital documents that can be 'possessed' by an individual, transferred between parties and distinguished from copies, similar to their paper-based counterparts.
A notable feature of the Enigio system is that only the party creating the document needs to be an Enigio user, which enables broader market participation.
Secondary purchasers can take possession of digital bills of exchange without signing commercial terms with Enigio, utilising their public notary solution available on the platform's website.
Alternatively, if secondary purchasers do not wish to hold the assets themselves, these can be held by the executing party on their behalf, providing flexibility in how institutions engage with digital trade documentation.
Alex from Enigio notes: “The successful use of digital negotiable instruments in the secondary market is particularly exciting, as it highlights the growing maturity of digital trade finance and the tangible benefits of faster, more secure processes that unlock greater liquidity.”
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