HSBC and ING successfully complete first letter of credit on Blockchain
The two banks executed the first international trade finance transaction in real conditions on the distributed registry platform of startup R3, in which many banks invested. This transaction was completed on a single application in 24 hours instead of the usual 5 to 10 days.
HSBC said this morning it completed the first international trade finance transaction using the Blockchain to improve the efficiency of international financing and save several billion dollars.
This new kind of operation took place last week, with a shipment of soya from Argentina delivered to Malaysia through subsidiaries in Geneva and Singapore.
HSBC & ING Bank have used Corda blockchain technology to finance a shipment of soya beans from Argentina to Malaysia for food & agriculture conglomerate Cargill. Revolutionising the future of Documentary Trade. #TransformingTrade pic.twitter.com/MOBA1gQYIl
— HSBC (@HSBC) May 13, 2018
HSBC explained that the transaction required only one shared digital application and not several separate systems, making it a first of its kind. We also learn that the platform used is called Corda and is supported by 12 banks around the world. It was developed by R3, a Blockchain company based in New York.
With this new application, banks are trying to speed up international trade operations and minimize the risk of fraud in letters of credit. A format widely used today in international trade but quite long to set up (about ten days). Thanks to the Blockchain, the process is automated and saves time, money and a more reliable and transparent system.
International trade finance enables a company to better manage its cash flow and mitigate financial risks by using appropriate methods and tools for the international trade.