R3 blockchain consortium gets smart on trade finance
R3 and over 15 of its blockchain consortium member banks have “successfully” completed two prototypes using distributed ledger technology for smart contracts.
The banks designed and used self-executing transaction agreements – aka smart contracts – on R3’s Corda distributed ledger platform to process accounts receivable (AR) purchase transactions, aka invoice financing or factoring, and letter of credit (LC) transactions.
David Rutter, CEO of R3, says “trade financing is a crucial income stream for banks” but the “processes used to facilitate trade financing have become antiquated and unfit for purpose in today’s increasingly digital world”.
R3 adds that traditional processes are largely paper-based and are therefore time consuming and prone to risk and fraud. It says its prototypes are “significantly faster, more reliable and cost-effective”.
R3 consortium members involved in the trials include Barclays, BBVA, BNP Paribas, Commonwealth Bank of Australia, Danske Bank, ING Bank, Intesa Sanpaolo, Natixis, Nordea, Scotiabank, UBS, UniCredit, US Bank and Wells Fargo.
On the same day (10 August) as R3’s announcement, Bank of America Merrill Lynch, HSBC and the Infocomm Development Authority of Singapore (IDA) teamed up to develop a blockchain prototype for trade finance innovation.
The consortium used the distributed ledger framework provided by Linux Foundation’s open source Hyperledger Project; and the proof of concept has reduced manual processing in LC transactions.