As part of efforts to digitalize Singapore’s bunkering sector, DBS has successfully completed the country’s first live bunker delivery financing transaction via an electronic bunker delivery note (BDN).
The pilot transaction was done in partnership with Trafigura Group’s marine fuels supply and procurement joint venture TFG Marine, as well as leading maritime players Ocean Network Express (ONE) and Ascenz, which provided the underlying technology to digitalize the BDN. It was supported by the Maritime and Port Authority of Singapore (MPA).
Singapore is the world’s leading hub for the delivery of fuel for use by ships, with close to 50 million tonnes of marine fuel sold in 2020. However, banks currently rely on physical copies of the BDN and other supporting documents to provide bunker financing to clients.
This is a cumbersome process that typically takes a few days to a week as clients have to manually deliver the physical BDN back to shore for compilation with other paper documents, before a trade finance application can be submitted.
Under two hours
The newly digitalized process demonstrated that in future clients will be able to obtain financing for their underlying trade in under two hours, enabling them to obtain working capital faster and better manage their cashflows.
Another pain point the digital BDN seeks to mitigate is the risk of fraud. In the traditional bunker trade world, the physical BDN has a higher risk of being manipulated as it can be used to request for financing for underlying deliveries which may not be genuine or which could have already been financed by another bank. With the digitalization of the BDN, this risk is mitigated as counterparties are now able to ascertain the trade data at source.
This is done by leveraging the Mass Flow Meter (MFM) system for bunkering electronically. This helps to provide greater transparency and certainty to participants in the bunker trade supply chain ecosystem.
Sriram Muthukrishnan, group head of trade product management at DBS, says: “Trust and transparency are the keys to Singapore’s continued leadership in trade and trade finance. The digitalization of bunker delivery notes is one of many pivotal steps necessary to transition Singapore’s bunkering sector into the digital era and to ensure our port and shipping industry is future-ready.
“The objective is to co-create an end-to-end digital workflow that enhances efficiency and transparency for bunker trades, while building trust with banks and shipowners which are fundamental to the long-term growth and development of Singapore’s bunker ecosystem.”
Financial innovation
The pilot transaction comes on the back of an agreement between DBS and MPA in 2020 to accelerate the digitalization and innovation of financial services and payments across Singapore’s maritime industry.
The collaborative areas which MPA and DBS have identified include streamlining and enabling payment transactions between the users of maritime services to expedite end-to-end payment life cycles, as well as digitalizing supporting documents for financing. MPA and DBS will also facilitate innovation and creation of potential new financial solutions with the startups ecosystem for the maritime sector.
For the next phase of development, there are plans to integrate the use of digital BDNs with SGTraDex once the digital utility is operational in 2022. SGTraDex is a common data infrastructure launched in July 2021 to facilitate trusted and secure data sharing across supply chains. Additional transactional data points such as the receiving of vessel and barge location and the timing of delivery can help to enhance visibility to the underlying physical trade.
