HSBC Completes Blockchain Trade Finance Transaction on Corda Platform

HSBC says that is has completed the world’s first ‘commercially viable’ blockchain trade finance transaction, issuing a letter of credit to Dutch bank ING using blockchain technology.

HSBC said the trade for U.S. food and agricultural group Cargill, involving a shipment of soybeans from Argentina to Malaysia, has shown that the blockchain platform is ready for commercial use by the $9tn market for trade finance.  

The ‘Corda‘ platform used by HSBC for the transaction, was developed by blockchain start-up R3, who have organised a consortium of banks to work together to create blockchain solutions for a variety of issues.

The existing system is timely and expensive, requiring numerous paper records and a variety of parties involved.  Corda’s blockchain platform allows the permission based parties to securely negotiate, agree and track in real time.

Globally, banks such as HSBC still operate trade-finance floors piled with paper documentation.  HSBC and ING said that the exchange was performed in 24 hours, compared to the five-to-10 days it normally takes to complete.

Vivek Ramachandran, HSBC’s head of innovation and growth for commercial banking said:

“The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous,” he added “The quick turnaround could mean unlocking liquidity for businesses.”

Ramachandran highlighted the fact that banks, shipping companies, ports and customs operations would all have to take up the same technology before it could gain widespread usage.  He said:

“The next stage is actually encouraging as many participants as possible to sign up to the utility”

HSBC’s head of innovation compared ‘blockchain trade finance’ to that of standardised shipping containers, which eventually were adopted by all entities and have become an industry standard.

Until now, there have been various proof-of-concept trade transactions performed using blockchain, however HSBC claimed that this one for Cargill was the first that could have commercial applications and is ready to roll out for use.

In 2017, the UK based bank took $2.52bn in trade-finance revenue, making it one of the largest banks in the industry globally.