Blockchain is Viable for Trade Finance According to HSBC
Blockchain in Trade Finace
HSBC Holdings completed their first Blockchain transaction. The company was impressed by Blockchain and went on to say that the technology is now commercially viable for trade finance. The London based bank together with ING Bank NV handled a letter of credit for a company called Cargill Inc which entirely relied on Blockchain technology. The platform was developed by R3 Consortium according to an email statement from the bank today. The letter of credit supported shipment of soybeans transported from Argentina to Malaysia last week.
The transaction was entirely done on Blockchain being an end-to-end trade between the buyer and the seller including their banks. It was very successful since it did not go through multiple systems but instead it was completed on one shared digital application. According to HSBC it was the first scalable live trade finance carried out using Blockchain technology.
Vivek Ramachandran, HSBC’s head of global innovation and growth for commercial banking noted in the statement that:
“This will be an inflection point for how business is conducted. With Blockchain technology transactions are faster because the paper reconciliation is removed since all the involved parties are directly linked to the platform making updates timely and instantaneous.”
Blockchain is already viewed as the technology which will steer the next industrial revolution. The technology helps in the streamlining of the traditional paper-intensive process in trade finance. The traditional process has always been very expensive and time wasting. Normally it requires about 10 days to exchange documents. However, with blockchain technology, a transaction which required 10 days in the traditional setup is done within 24 hours like the Cargill transaction which was completed within a day.
The efficiency and timeliness of Blockchain technology is attracting a lot of banks. They want to reduce paperwork as well as ensure client satisfaction during transactions which involve several parties. Through the technology the transfer of information and data is also very safe and can be accessed by the authorized parties only.