Financial services group HSBC has recently revealed that it had for the first time utilized blockchain technology to complete a speedy commercial trade finance transaction that normally takes around a week using normal paper-based processing mediums.
The transaction was the first time that a blockchain, the technology which powers cryptocurrencies such as Bitcoin, has been used for a commercial trade finance settlement.
As reported by CNBC, HSBC had issued a letter of credit for U.S. food and agriculture firm Cargill. The settlement covers the movement of bulk soybeans to Malaysia from Argentina, with the letter of credit for this issued by ING, a Netherlands based financier.
HSBC said that it is excited about the development as the user case for blockchain gets traction and support from both private and public sector officials in major markets such as the United States and China.
“The need for paper reconciliation is removed because all parties are linked to the platform and updates are instantaneous. The quick turnaround could mean unlocking liquidity for businesses,” HSBC’s head of growth and innovation was quoted saying in a statement.
The blockchain is expected to improve efficiencies, improve transparency and cut on paper trails, thereby reducing lead times for processes such as a letter of credit issuance. Letters of credit are a form of guarantee by a bank that payment for a transaction will be received.
The blockchain is heavily decentralized, with various parties to a transaction linked by computers accessing the same network, giving a ledger look which could be useful in the banking sector, say experts.
Reports say HSBC utilized the Corda blockchain platform developed by R3. The company runs one of the world’s most popular blockchain banking consortiums.
The user case for blockchain in finance and banking has been strengthened by Poland, which has now moved to store banking records on a blockchain application. On Monday, technology company, Billon said it would implement “blockchain for storage and secure access to sensitive customer information” for the banking industry in the country.