HSBC Holdings announced the world's first commercial financing transaction using blockchain.
"At the moment, buyers and suppliers use a letter of credit, typically concluded by physically transferring paper documents, to underpin transactions", Vivek Ramachandran, global head of innovation and growth at HSBC's commercial banking unit told Reuters. This exchange was done in 24 hours. Speaking further, he said that "With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous".
It's a lot less exciting than some of the other blockchain technologies we've been promised, which have ranged from decentralised currencies like Bitcoin to literal diamond exchanges, but it's probably the most sensible indication yet of the future direction of the technology. Thanks to blockchain, all operations and transactions can become faster, simpler, more secure and more transparent which is extremely needed.
However, before it can progress further with integrating blockchain into global trade, HSBC needs more banks, ports, shipping companies and customs operations to adopt similar collaborative technology platforms. An email statement revealed that the R3 consortium created the blockchain technology used to facilitate the trade deal.
Citing statistics from the United Nations, HSBC claims that digitizing trade could reduce transaction time by 44 percent, reduce costs by 31 percent and save the industry $257 billion per year. "The quick turnaround could mean unlocking liquidity for businesses".
Ivar Wiersma, Managing Director, Innovation Wholesale Banking, ING, said: "It's exciting to see this transaction has been completed successfully with clear client benefits in speed and ease in execution".
The bank added: "Blockchain can pull trade into the digital age".
The announcement is excellent news not only for the bank but also for the companies involved in worldwide trade finance.
R3 and the group of 12 banks supporting the Corda application are seeking to expand the network on an open basis to drive adoption across the industry.