Interview between Matt Dolton and Commodity Technology Advisory (Original)
ComTech Advisory: We recently issued our disruptive technologies research report in which we discussed the massive changes taking place in the commodities sector and the new technologies such as blockchain, AI and so on that are already potentially revolutionizing how business is done or will be done. What changes are you seeing in the industry at the moment?
Matt Dolton: We’re entering a very exciting time for the commodities sector at the moment. Some of the hype over blockchain is beginning to die down as the proofs-of-concept and trials draw their conclusions, and the real use cases will start to emerge. One interesting piece of feedback that we are hearing is that business models need to change, not just the technology. We’re seeing a lot of people still interested in working with us on blockchain, but at the same time being aware of the limitations and looking for fast, easy solutions to real business issues. Business agility seems more of a key driver than ever.
ComTech Advisory: And what technologies do you believe are poised to transform business processes in the sector?
Matt Dolton: Everyone seems convinced that distributed ledgers have a key role in the future of financial services and I agree. However, I think for commodities, topics such as machine learning and Internet of Things will could deliver a greater short term impact. The sophistication of commodities technology often seems to be inversely proportional to the position through the supply chain, where growers/producers in emerging economies have a lot less technology at their disposal than, say, futures traders in Chicago. Hauling the rest of the supply chain up the curve is of our mantras.
ComTech Advisory: And what technologies do you believe are poised to transform business processes in the sector?
Matt Dolton: Everyone seems convinced that distributed ledgers have a key role in the future of financial services and I agree. However, I think for commodities, topics such as machine learning and Internet of Things will could deliver a greater short term impact. The sophistication of commodities technology often seems to be inversely proportional to the position through the supply chain, where growers/producers in emerging economies have a lot less technology at their disposal than, say, futures traders in Chicago. Hauling the rest of the supply chain up the curve is of our mantras.
ComTech Advisory: One area of change is how the different industry players are looking at other areas of opportunity to grow their businesses and attract/retain customers – a bit like the banks did a while ago. What are you observing there?
Matt Dolton: It’s clear that some of the forward-thinking logistics players in commodities would like to expand their offerings. We are seeing warehousing and storage companies looking to provide financing and other value-add services, and to do that they are having to invest in technology. Trust is a massive competitive edge in warehousing and storage, so any technology which increases trust is bound to be advantageous.
ComTech Advisory: Kynetix has changed its focus a little in recent months in response to some of these shifts and opportunities. Where are you now focused?
Matt Dolton: The core of our business remains digitalizing commodities especially for exchanges and trading platforms, but in common with many new entrants, we are looking at helping warehousing and banks address their risk issues.
ComTech Advisory: What new technologies are you bringing to the table?
Matt Dolton: Having ‘been there and done it’ with blockchain, we are increasingly seeing that businesses just need easy technology solutions to common challenges. One area we have been investing in is warehouse surveillance technology using IoT to link our core Sentinel platform inventory and post trade deliveries solution to the physical world. This means commodity owners, banks and financers can get real-time monitoring and security information related directly to the relevant commodities.
ComTech Advisory: What do you see as the future of the commodity exchange? Will it be impacted by changes in business models or technologies?
Matt Dolton: One of the aspects most overlooked when it comes to DLT is the role that exchanges play in governing markets, not just providing a venue or platform for trading. For example, KYC is a crucial requirement, as is the administration of the rules with penalties etc.
Our view is that we expect to see more commodity exchanges and trading platforms launching which take advantage of the technological advantages now being made. In theory, it is now possible to pull together most tech for an exchange by integrating software offerings available as services (e.g. trading, matching, KYC). This means the heavy upfront investment needed to launch a new exchange (or product) is no longer the barrier it once was.
New exchanges will start to ‘democratize commodities’, meaning emerging producer regions creating exchanges or trading platforms that appeal to the less traditional players with greater emphasis on topics such as ethical supply chains and responsible sourcing.
