HSBC Holdings PLC completed its first live transaction using blockchain technology, which according to HSBC shows that the technology is now commercially viable for conducting trade finance transactions.
According to an emailed statement on Monday, HSBC along with ING Bank NV handled a letter of credit for their client, Cargill Inc., using blockchain technology developed by the R3 consortium. This letter of credit was supposed to back a shipment of soyabeans made from Argentina to Malaysia, according to the statement.
This was an end-to-end trade between two parties and their banks that was completed on just a shared digital application rather than usual multiple systems, HSBC added. This end-to-end trade transaction is the first live trade finance transaction ever made using the nascent technology.
London-based bank’s global head for innovation and growth for commercial banking, Vivek Ramachandran, said in the statement that this trade deal is an inflection point for how we trade. He added that with advent of blockchain, reconciliation of paper-based documents is removed as all parties involved are linked on the blockchain-powered platform and can receive the updates instantly.
HSBC added that the traditional way of conducting deals in the field of trade finance is an intensive, time-consuming process that requires parties to exchange multiple paper-based documents, which can take as long as five to ten days. But the Cargill Inc. transaction, relying on blockchain, was completed within 24 hours, according to the statement.
Eliminating trade-related paperwork and putting it into an electronic form could cut the time it takes to export goods by up to 44 percent and reduce costs by as much as 31 percent, HSBC added, citing a UN study.
The move made by HSBC and ING, is a great step in boosting efficiency and securing transactions in multi-trillion dollar funding in international trade.