HSBC and ING Bank have used Blockchain technology to execute a live trade finance transaction for food and agricultural firm Cargill.
The transaction was made using distributed data technology company R3’s Corda scalable blockchain platform.
It involved a bulk shipment of soybeans from Argentina through Geneva’s trading arm of Cargill, to Malaysia through to Cargill’s Singapore subsidiary as the purchaser.
A letter of credit was issued using the Corda blockchain by HSBC to ING.
HSBC said: “The transaction demonstrates that blockchain as a solution to trade digitisation, is commercially and operationally viable. Conventional exchanges for paper-based documentation related to letters of credit usually take between 5-10 days. This exchange was done in 24 hours.”
The Letter of Credit transaction was an end-to-end trade between the seller and buyer across a single shared application rather than on multiple platforms.
HSBC’s head of growth and innovation, Vivek Ramachandran, said: “What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure.The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous. The quick turnaround could mean unlocking liquidity for businesses.”
Blockchain tech in wealth management
In terms of wealth management, using blockchain technology in the processes behind selling and buying mutual funds could potentially save over $2.7bn (£1.9bn) a year, according to Technology company Calastone.
Research by Private Banker International (PBI) has also found that blockchain technology could revolutionise private banking and wealth management.
For example, Markus Mueller, global head of the chief investment office for Deutsche Bank Wealth Management, believes that at an operational level, blockchain could enhance the overall client experience at wealth managers by removing friction from the customer acquisition process, tweaking management of model portfolios and speeding the clearing and settlement of trades with much lower fees.
The platform could also automate mandatory processes, which will result in operational cost savings and reduce operational risk, while increasing efficiency.