VAKT is a multi-sided digital platform providing post-trade services to the physical commodity trading industry. Our goal is to become the digital backbone of all physical commodity markets, allowing transactions to be confirmed on the platform; the details of their logistics to be processed; and settlement to be effected seamlessly and securely on VAKT — both the delivery of the goods and the associated payment.

As such, our main contribution to the industry at this early stage is to help our clients reduce their unit transaction costs. With so much fundamental data now digitised and (almost) freely available, including considerable improvements of cargo tracking in oil trading over the past 3 years for instance, the margins of physical traders have compressed significantly. By comparison, their processes have remained relatively unchanged for the past 30 years; there is therefore considerable scope for a reduction in costs by digitising the whole back-office and operations chain of their business.

This is a difficult question to answer since it actually depends on the definition of digitisation. If digitisation is understood as a transition from handling paper documents to sending emails with electronic versions of these documents attached, the proportion is already very high, probably 70-80% of all trade. The internet is a much more reliable delivery method than the traditional postal service or couriers. There are many countries where customs and banks are actually impediments to that form of digitisation.

Now, if digitisation is defined as capturing in software the business logic of the supply chains’ workflows and allowing multiple value participants — such as traders, brokers, terminal operators, surveyors, shipowners, port agents and trade finance banks — to bring their respective data contributions on a shared ledger, such data being legally binding on all parties concerned, then the percentage of digitised supply chains is extremely low, probably less than 2-3%. In financial services, a distinction should also be made between traditional lending and capital markets, the latter being a lot more advanced in their digitisation journey than the former as they tend to process relatively standard transactions.

If we already cover their market, there is no rational reason for any forward-looking commodity trader not to adopt VAKT at this stage; but we hear from prospective clients what their concerns are. One of them is the cost of integrating their own systems to VAKT; if that is the case, we are here to assist and lower that cost: it is in their best interest, and ours. Another, which is common to all digital platforms, is the need to have created enough network effect on VAKT to justify the cost of joining.

That is the reason why we were created and are now owned by a consortium of some of the largest oil traders in the world: they bring a critical mass of transactions in the market segments that we launch. We are following the same method of finding early volume with surveyors, terminal operators and trade finance banks.

We are currently configured to serve the oil and refined products trading industry, which is under immense pressure to lower its carbon footprint. By lowering the cost of physical transactions and allowing the optimisation of flows, we can make an immediate contribution to the environment and society. The drawback is that this is a significant but hard-to-quantify contribution.

There is a much more ambitious goal which is within reach of VAKT’s technology right now: calculating in real-time the carbon footprint of hydrocarbon trading, company by company and all over the world at once, using blockchain and machine learning. This is a complex problem, which requires to know which traders bought FOB or CIF (whilst respecting the confidentiality of their commercial operations) and allocate the carbon cost of shipping accordingly. VAKT can do this thanks to our confirmation facility, which is aware of the Incoterms of transactions.

This also requires to know which exact bunker fuel quality is being consumed by the tanker affecting the voyage: this is now also possible by tracking ships carefully with AIS signals and having shipowners volunteer their fuel slate to the VAKT platform. Reaching this ambitious goal would help our clients — the largest oil traders in the world — report and lower their emissions footprint. This is worthy of our time as a company: the oil industry is very /unlikely/ to disappear in the next 20 years and the technology that VAKT is deploying can help it renew its social mandate to operate.