HSBC and ING in industry-first blockchain trade finance transaction
HSBC India and ING Bank Brussels say they have “successfully executed a blockchain-enabled, live trade finance transaction” – this was done jointly with Reliance Industries and Tricon Energy.
The participants say this is “an industry-first” as the blockchain platform integrated with Bolero’s electronic bill of lading (eBL) platform to issue and manage an eBL. This allowed a digital transfer of the title of goods from the seller to the buyer in the underlying trade. It further enabled the underlying trade to be fully digitised.
The end-to-end transaction was executed on R3’s Corda blockchain platform, which is a single shared application, rather than requiring multiple isolated digital systems across various counterparties located around the globe, the participants explain.
The letter of credit (LC) was issued by ING Bank for Tricon Energy USA (importer) with HSBC India as the advising and negotiating bank for Reliance Industries, India (exporter). The companies claim “this solution is a significant improvement for any organisation involved in buying and selling goods internationally, as it truly brings together all parties onto one platform”.
Ajay Sharma, regional head of global trade and receivables finance, Asia Pacific for HSBC, believes “the collaborative approach adopted to develop this technology has the potential to transform conventional trade finance”.
Srikanth Venkatachari, joint CFO, Reliance Industries, notes that “the use of blockchain offers significant potential to reduce the timelines involved in exchange of export documentation from the extant seven to ten days to less than a day”. Also, there is promise of “significant optimisation of working capital” when adopted at scale, as well as “transparency, security and synergy across all the parties and stakeholders involved”.
This transaction, the participants say, validates the commercial and operational viability of blockchain as an alternative to conventional exchanges for paper-based documentation.
At present buyers and sellers use paper-based LCs to underpin transactions. Physical documents are sent to each party in the transaction by post, courier or fax. While these paper documents provide certainty, the time and cost involved in processing them are deterrents for exporters and inters and impairs the pace of trade.
R3, HSBC, ING, the other six banks supporting the Corda application (Bangkok Bank, BNP Paribas, CTBC Holding, NatWest, SEB and Standard Chartered) are seeking to expand the network on an open-source basis to drive adoption across the industry. This includes technology partners that can provide banks and customers tool kits for easier onboarding, ecosystem participants, besides buyers/sellers and their banks.