In conversation with... Carl Wegner, CEO and Founder, Contour

Written by || February 17 2022

contour

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Hello everyone and welcome back to, ‘In conversations with’ the FinTech leaders across Asia Pacific, my name is Zennon Kapron, and I'll be leading you through today's discussion. We are very lucky to have Carl Wegner here. Carl is the CEO and founder of Contour. Carl, great to have you here today.

Thanks for the invitation. Really happy to be here.

To kick things off, let's jump right in. Tell me a little bit more about Contour and some of the problems that you're looking to solve?

Contour is a network of banks, corporates and technology partners that are looking to make trade finance, more inclusive, secure and efficient. We started out as a project with eight banks, some of the largest trade finance banks in the world, we had HSBC, Standard Chartered, ING, BNP, Citibank all looking to see how they could collaborate and make trade finance a little bit easier for everyone, for big companies and small companies. Now, those eight banks have expanded to 16 banks available in 51 countries, and we continue to expand the network and the customers that we work with.

I mean, obviously, during this pandemic, we've seen a lot of digitization, what changes have you seen in the nature of your clients and what are they looking for over this period?

Well, I can't really compare pre-pandemic and post because we actually started our company in December 2019, just at the beginning of the pandemic, but obviously, the pandemic has made all companies and whether they're large multinationals or SMEs acutely aware of the challenges of using paper for trade finance. Trade is complicated, and with all the parties with paper, if no one can go to the office how do they sign those pieces of paper and then pass them along to the next step? So digitalization is something that's really growing during the pandemic, and the benefits are seen, and I think we will see the adoption much quicker than it’s ever been.

It's really interesting to see how that's changing over time, especially in trade finance, I mean, blockchain is a big part of Contour’s solution and the story around the digitization of trade finance. Can you talk a little bit about the adoption of blockchain based solutions for trade finance in Asia? And where has it been? Where is it going? And where within the region geographically are you seeing the uptake?

So blockchain is a base technology, and blockchain or enterprise blockchain really only goes back at the most five years. As a technology, and the way I put it, and I'm not technical, it's an elegant way of managing multiple databases so they stay in sync. It's important for when you have data privacy issues, you have regulatory issues, where you need to keep databases in certain countries, or even when companies need to keep their databases together. So, blockchain as a technology, it doesn't solve everything, but it solves that management of data, when you need it, and especially for a global platform like Contour, there's a need to manage data from all these countries around the world. In Asia blockchain is something that's talked about a lot. I think the adoption rates in Asia are a lot higher, we see over 60% of our transactions have one foot in Asia, but of course, 60% of global trade has one foot in Asia, so that sort of fits. In countries specifically, we see obviously here in Singapore, the regulators and the FinTech community grows quite quickly. But we also see good adoption in Thailand, Vietnam, even Bangladesh and of course China and India.

What do you see as some of the key challenges for companies that are looking to transition to a more digital form of trade finance and specifically blockchain? What are some of the challenges that you see from your clients?

I think the biggest challenges is mindset. Whether it's a large company or a small company there's very often the thought process, this is great, I want to digitize, but I won't start until everything is digitized. So I'll start when it's all ready, and then I'll start. Digitalization like any innovation is a journey, and you have to start with what you have, learn, and then progress. So we're constantly talking to our clients, or the banks or corporates that you can't wait to its all ready, because it'll be too late. You have to learn as you go along. So I think that the mindset that it has to be all perfect then I'll start, it doesn't work that way. Think back to some example, like your banking app, people have been using banking apps for what, 10 years now and the first thing they could do is show your balances. But if everyone had said, I'm not going to use a banking app until I can do FX in 20 countries then I won't even start using it, it never would have progressed. So digitalization, like any sort of advanced technology is a journey. I think people have to start that journey, accept that it's not going to be perfect, but they're learning as they're going along. Even in our system, we have the ability for something as complicated as a letter of credit, to have hybrid presentations. So for some reasons, if because of regulatory reasons, not everyone's completely digitized, if some of the components of that transaction have to be on paper, that's okay too. Because they realize it's a journey, and people are going to get more and more digital, but they have to start.

Surely legacy infrastructure is a big challenge for these organizations as well. How are you seeing them address it? Is it that piecemeal approach that you talked about that? Or are they looking for a kind of wholesale replacement of the legacy infrastructure around trade finance?

Well, there's a lot of legacy infrastructure out there and I think it's not going to be completely replaced. You’re not going to have on Friday a legacy system and then Monday you turn on a fully blockchain enabled system that does everything. Every system is going to have to manage and work with legacy systems. Some of those legacy systems are infrastructure, they’re back office systems, and some are there for regulatory purposes. They're all going to be there, so it's not an issue. API's are a way to connect to legacy systems. We're connecting to systems, they could be blockchain systems they could be non blockchain old legacy systems, but API's work fine for bringing, what I talk about as digital inheritance. That inheritance, you want to make sure that it's keyed in once not keyed in twice. If you can bring that data over, and it's passing through using API's, it's going to be more accurate, it's going to be quicker and it's going to be smoother. So it's building those bridges, and API's work fine. So those legacy systems are going to be there, we're not going to replace them overnight. And some of them may never be replaced. But there's a myriad of systems out there. And we're going to have to just all connect.

That idea of bridging is very important, obviously, on the technology side, but also on the business side. Can you talk a little bit about the partnerships that you have, I mean, partnerships for you guys are key for building a strong network and developing the business. How have you worked to develop these partnerships across Asia?

Partnerships are a huge part of our ecosystem. So at the moment we're talking to about 150 partners right now. We see partnerships as a way to help our customers to do their business even better, we're not going to be able to do everything, and partners can be any part of the ecosystem that brings in data that connects to for instance, a letter of credit. So it could be a component letter credit, it could be an operative letter credit that goes to another system. So we talk with all these partners. Now how we focus on these partners, we're only working with about 20, or 30 of them is everyone wants to work together. It's great. But as a small company, we have to focus where there's a customer nexus. So if there's a bank or a corporate, where they say, I work with Contour, I work with another company, please connect. And so if they say please connect, then we'll look at API's. That partner could be built on our three quarter blockchain, it can be on another blockchain system, it could be non blockchain, it doesn't matter. We can still connect to them. But partners are a key point of it. Trade finance is complicated, trade itself is even more complicated. Everyone says that they're the front end, they manage trade well, they manage certain components of trade. Trade whether you're, it's the shipping part, it's the cargo booking, whether it's the finance, whether it's the AML sanction checking, there's all these things involved in trade, inspection and everything. So there's a lot of players to connect and that's what makes it interesting to talk to all these partners, because you learn about different industries, a partner can be an industry specialist in in mining, or iron ore, something like that. So we're learning about their industry as well, we're never going to get to understand that level of detail in that industry but if they have data that can connect to our system, it's fantastic to be able to bring it in.

Sure and be part of that story. Trade finance, and especially here in Asia, small, medium enterprises for many economies are the bedrock of those economies. Can you talk a little bit about how what you're doing might enable financial inclusion and what the impact would be for some of these smaller enterprises?

Technology is obviously a huge enabler of inclusion. Technology, its bits and bytes, it's not that expensive, and if you can build your technology to scale, then you can allow the smallest companies to have access to the same kind of features that the largest multinationals have. So with blockchain or DLT, that's a little bit harder. And again, I sort of said before, it's an elegant and expensive way of managing multiple databases when you could just have one database. But you do need it in something like international trade. A lot of our development recently has been to scaling and to be able to offer a low cost model for SMEs. So those could be SME corporates, but in countries that are developing countries, like Bangladesh or something like that, or it could be banks. So smaller banks. In our system, we have big banks, the biggest global banks and very small banks. And it's really neat, because they can see we're offering a platform where the smallest bank can offer the same services that someone like an HSBC or Standard Chartered, or Citi is offering, they're pretty excited because they don't have to invest millions of dollars. It's a web based service, they can do integration, and they can offer that same level of customer delight that the biggest banks can do.

Right. A big part of this must be regulations as well. I mean, can you speak to a little bit about what regulators are doing around digitalization of trade finance, both in the context of financial inclusion, and just in general? I mean, I would assume they're supportive, I would assume that they're moving forward on things, what have you seen from the regulators and where are the bright spots?

So you need regulation in something like global trade and financial services. The regulators have made tremendous progress, especially in the last couple years because of the pandemic, a lot of things have fast forwarded that hadn't happened. One of our partners talked about getting maybe about 10 new government agencies a year on their platform, and now they're getting, during the pandemic, 10 a month. So it is much quicker. So regulators are learning, they're realizing they have to spend time understanding, whether it's CBDC, or trade finance or digital documents. I think the biggest challenge for really making global trade completely digital is building some digital standards. This is something the regulators are beginning to talk about, you have some forward looking regulators and governments like here in Singapore, who are trying to set these standards and encourage other countries to join them in setting standards. Setting standards is hard, right. There's hundreds of countries out in the world, everyone wants their own standard. So some of these global international organizations like ICC are trying to set standards for all the regulators to follow. So the regulator is going to have to learn they're going to have to allow more digital documents. I think the key thing is that digitalization of documents does not mean losing control. And as they learn, and as they allow a higher percent of digital documents to replace the paper that's going to speed up things more and more.

It makes a lot of sense. I mean, we've talked a lot about current trends and one of the key topics for the Singapore FinTech Festival last year was obviously web 3.0 and to a certain extent DeFi. What do you see as being the future of web 3.0 and DeFi? I mean, maybe first of all start off what is your definition of web 3.0? Because it varies for everybody, and then what are the implications of some of the new technologies that are coming through with DeFi? And then also, if you could talk a little bit about CBDCs and stable coins and what the impact you see on trade finance with those?

Well, it's a lot to answer in a few sentences. But it's interesting to see talk about DeFi or 3.0, or the metaverse, and all this. The first thing, things are changing and continued disruption, it's a good thing. Because we try in Contour to constantly look at how can we change, how can we disrupt, nothing is locked in because the world is changing, customer needs are changing, and we want to be as nimble as possible. So I think this disruption by these new paradigms is good. Now, how much is disruption? how much is just renaming? What was there before? Is another way of thinking of it, right. So DeFi, Contour is decentralized finance, so we are DeFi, we didn't talk about us as DeFi, right. I mean, if you talk about some of these new things, is a transaction where multiple parties have decided to take a piece of paper and digitalize it. Is that sort of tokenizing it? Well, if it's immutable, is that sort of an NFT? I mean, there's different ways in interpreting some of the same stuff we've been doing. And so I think if there's more investment, if there's more interest in this and therefore more money out there to develop more advanced connectors for the ecosystem, it's a good thing. But I don't think it is changing anything tremendously, because we're still looking at like I said, before, those regulations have to change. Talking about the CBDC's and things like this, I think it's fantastic. I was on the earliest projects here in Singapore, project Ubin, Inthanon in Thailand, LionRock in Hong Kong. And it was really interesting in those early days of CBDC to see how much the regulators really wanted to learn and they were just eager to learn, and sometimes they're starting from ground zero. Sometimes I saw the questions from some of these regulators, very, very high level, very intelligent questions. They were pushing us, when I was working at R3, on answering these very important questions on security and immutability, and all that sort of stuff. So they are learning. I think it's fantastic that they're embracing this. Now, how they embrace it is going to be different per country. You know, and again, what their government regulations and mindset is. How it affects trade, I think trade finances is still going from a very traditional base to just becoming digital. I don't think that we're going to be doing international trade on stable coins in the near future. I think a lot of this stuff has to happen. On the consumer side first, consumers a little bit easier, their barriers to entry are lower, their need for security is lower. And I think they'll probably be the leaders in some of this, and then it'll move to move to the corporate business world.

Makes a lot of sense. This has been a great conversation. Carl, Thanks for joining us on ‘In conversation with’

Thank you for the opportunity to share a little bit of our experience at Contour