HSBC has claimed to be the “world’s first commercially viable trade finance transaction using blockchain technology”.
Last week, HSBC and Dutch bank ING completed a financial transaction with Cargill which involved a bulk shipment of soybeans from Argentina to Malaysia.
Typically, the payment process would be time-consuming, but because of HSBC using a platform developed by blockchain start-up R3 called Corda, the payment transaction took just 25 hours to complete.
“The reason why letters of credit have persisted is because of two real challenges — the absence of digital infrastructure and the challenge of coordinating multiple parties,” said Vivek Ramachandran, Global Head of Innovation and Growth at HSBC to Reuters.
“This platform helps us overcome the first and I think the technology and everyone focussed on it gives us the impetus to go after the second now with hopefully much better results than we have seen in the past.”
The use of blockchain in the finance sector is also expected to reduce the risk of fraud in letters of credit and other transactions.
Written by Leah Alger