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HSBC and ING lead on “first” viable, scalable trade finance transaction on blockchain

The two banks and food and agriculture multinational Cargill carried out the trade finance transaction last week, involving shipping soybeans through multiple countries. R3’s Corda blockchain platform carried out the finance end of the transaction using a digital letter of credit.

ING and HSBC are enthusiastic about the potential of blockchain for trade finance, with Vivek Ramachandran stating: “This is an inflection point for how trade is conducted. . . With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous”. He goes on to mention that blockchain also makes trade finance transactions simpler, faster, securer and increases transparency.

The entire exchange took 24 hours, which is considerably less than the usual five to ten days is takes to handle paper-based documentation exchange.

In other “firsts” news involving banks and blockchain, Spanish banking powerhouse Santander and Broadridge Financial Solutions recently completed the “first practical use” of the technology in investor voting. The blockchain voting was carried out an annual general meeting, with the two parties claiming that it increases security and analytics along with operational efficiency, and “enhances global proxy vote transparency.”

Both of these above activities can be viewed as a part of a larger trend of banks embracing and experimenting with blockchain technology. Recently, again in trade finance, Commerzbank integrated a SAP business process with R3 Corda’s blockchain platform towards the end of enhancing financial services throughout its supply chain and in trade.  Nikolaus Giesbert, a Commerzbank board member, highlighted that the move is a “significant milestone” in his company creating and rolling out digital product solutions, and can specifically lend much needed support in trade finance.

Additionally, Swift and 34 banks recently completed a proof of concept involving real-time reconciliation. This test was a part of Swift’s nostro blockchain project, which was put in place to discern whether the technology has relevance to banks reconciling their international  nostro accounts in real time. Banks that took place in the proof of concept includeABN Amro, Deutsche Bank, JP Morgan Chase, Santander, Standard Bank of South Africa,  Rabobank, and Société Générale.

By Elliot Lyons, Research Analyst

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