The main aspect of the diamond industry that sets it apart from all others is the amount of trust involved in the business. In no other industry would goods worth thousands, hundreds of thousands or even millions of dollars be sent out to potential buyers on spec. For outsiders it may be hard to believe, but this is what happens in the diamond business all the time.

 

Conducting business in such a way is always risky but one of the features the diamond industry prides itself on is trust. Deals are sealed with a handshake and who you know is incredibly important to the way you do business.

 

But gaining trust is not always easy. It can be extremely difficult to establish credibility in the business world, especially since it is a world so influenced by family ties, history and personal relationships.

 

For some traders, restricting business to the realm of people they know by default limits the number of people with whom they can transact. One way that diamantaires deal with this problem is by using brokers, who act as intermediaries in buying and selling. But there are still limitations involved. 

 

Taking this situation of a self-limiting business model into account, in 2008, IDEX Online decided to guarantee the whole diamond exchange transaction, addressing the most significant problems for buyers and sellers of polished diamonds.

 

For sellers, this meant focusing on the problem of credit risk – the risk of sending goods and never being paid for them. For buyers, it meant looking at the guaranteed availability of goods as well as the security and piece of mind that comes from knowing that the diamond and the certificate on which the purchase took place do indeed match.

 

In addition, the move was taken to normalize diamond trading to make it like any other businesses that follow the golden rule – those with the gold rule. In other words, the company contemplated the issue of how to extend the boundaries of diamond trading to allow two individuals who have probably never met and just as likely never even have heard of each other to conduct a business transaction that would be beneficial to them both.

 

Guarantee became the key catch phrase as the idea gradually became clearer and clearer. Create a business situation where it did not matter whether the buyer and seller know each other, where they came from or their background in the business. All that would matter would be the answer to a simple key question – can they pay in cash for the goods they want?

 

Unlike extending credit – and in this industry credit terms can be surprisingly long term limiting the cash flow for sellers, and enabling buyers to get into situations that they cannot necessarily afford to be in – cash is king. If you want the goods and you have the cash, then that is the end of the story.

 

However, that wasn’t the end of the story. The question became how do you connect the buyer with the cash with the seller with the goods? The answer was Guaranteed Diamond Transactions™, which was launched at JCK Las Vegas.

 

Guaranteed Diamond Transactions™ has essentially created the world’s only polished diamond spot market. What this means in essence is that just like other spot markets, buyers can bid for and buy and sell diamonds in an unbiased trading environment.

 

This innovative system makes it as easy to get goods from A to B just as quickly as any other transaction, with the added advantage that there are no grey areas in the exchange. There is no wondering if the goods would arrive, if the goods will match their certificates and when the money will arrive. (Adding another level of guarantee, the suppliers are Kimberley Process & AML compliant and, in most cases, member of a diamond bourse). Everything takes place automatically for the buyer and seller, although there is a lot going on behind the scenes to make sure that the guarantees are fulfilled.

 

Here’s how it works: Buyers can either place a binding bid for a diamond they are interested in (tantamount to giving a “cachet” (offer) in traditional trading).The seller has the privilege of either accepting the bid if it fits in with their price parameters, or they have the option of rejecting the bid if they feel it is too low for them accept. If the bid is rejected, the buyer can continue to raise his or her price until the buyer and the seller reach a point that is agreeable to both sides. At this point, the buyer is obligated to pay for the goods and the transaction is immediately initiated.

 

A second option is for the seller to offer goods without the opportunity for negotiation. If this is the case, buyers click on the Buy Now button, thereby agreeing to the price and the transaction begins.

 

Once a price is agreed upon, either through the bidding process or immediately through the buy now feature, the seller is obliged to have the diamond in his or her immediate possession – and the system instantly kicks into gear.

 

The buyer’s money is placed in an IDEX Online “Parking” account and all they have to do is await the delivery of their diamond.  IDEX Online worked closely with HSBC NY to develop this unique payment system, which enables IDEX Online to withdraw funds automatically from buyers’ accounts that are pre-verified in the system. In this way, IDEX Online can provide the “guaranteed cash payment” to sellers.

 

While the buyers waits for their delivery, the seller prepares their diamond for collection by either G4S or Malca Amit, depending on where they are located. When the diamond is picked up, it is taken, along with its certificate, to a local grading lab. At the lab, graders check the diamond against its certificate to ensure that there is a genuine match between the diamond and its certification. Once this authentication is established, the diamond is delivered to the buyer, at which point their money is released into the seller’s account.

 

As to the timescale of the whole transaction, the securing of funds can take around 48 hours, and then it is no more than a further 24-48 hours to deliver the diamond. Again, this all depends on where the buyers and sellers are located. If the transaction is a local one, with both buyer and seller located in the U.S., for example, delivery can take place on the same day. If the diamond is travelling a little further, say from Mumbai to Canada, it can take a little longer.

 

While it is extremely advantageous to the buyer to have external confirmation that the diamond’s certificate is genuine, it is also advantageous that the seller sees the money in their account almost immediately rather than waiting weeks or months to receive their payment.

 

One of the aspects of Guaranteed Diamond Transactions™ that is different to “regular” trading is that the buyer purchases the diamond based entirely on what the certificate that accompanies it says. The potential buyer cannot examine the stone itself, they can only read the certificate. For this reason, only certified diamonds are eligible for trade on Guaranteed Diamond Transactions™, which is also why it is so important that the diamonds are authenticated against their certificates.

 

Since IDEX Online does not buy or sell diamonds, but rather facilitates their trade via the more than 1,200 suppliers worldwide who upload their inventory to the trading platform, there are no commissions to pay. There is, however, a small flat fee of $25 per transaction to both the buyer and the seller to cover the various aspects of the deal.

 

Regarding other costs, like in any transaction the buyer is responsible for the price of delivery and for shipping and handling costs incurred in delivering the diamond from the seller to the buyer. A small price to pay for a large guarantee

 

What is Guaranteed Diamond Transactions?

• Guaranteed Diamond Transactions™ is a fully automated online diamond trading service guaranteeing availability to buyers and immediate cash payment to sellers.
• The world’s only polished diamond spot market, Guaranteed Diamond Transactions™ is a user-friendly, 24/7 service that enables professionals to bid for, buy and sell diamonds anytime, anywhere. Providing an unbiased trading environment, Guaranteed Diamond Transactions™ takes no commission, just an incredibly low fixed transaction fee.
• Affiliated with several leading global companies, Guaranteed Diamond Transactions is empowered by an innovate payment system specifically designed in cooperation with HSBC Bank, one of the world’s largest financial services institutions.

How Can I Sign Up For Guaranteed Diamond Transactions™?

Guaranteed Diamond Transactions™ is available to all IDEX Online members. Please contact your local sales office for further details about using the system.