On Monday, May 14, 2018, the HSBC Holdings Plc has performed world’s first trade finance transaction using Blockchain Technology. It said that the indication of technology is feasible for trading finance.
Along with ING Bank NV, HSBC have successfully completed the transaction for food and agricultural group Cargill. However, it was based on Blockchain technology developed by the R3 consortium, the statement on Monday. The letter of credit backed a shipment of soybeans transported last week from Argentina to Malaysia.
Moreover, the use of blockchain technology by HSBC bank was to lessen the risks of credit and other transactions scams. According to the bank, the transaction was to end to end trade between a buyer and seller their respective banks. However, it was one shared digital application rather than multiple systems. Remarkably, it was the first live trade finance transaction using blockchain.
HSBC’s global head of innovation and growth for commercial banking, Vivek Ramachandran said:
“This is an inflection point for how trade is conducted. With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous”.
Moreover, the approach was after ING teamed up with Louis Dreyfus Company in January along with Societe Generale and ABN Amro. Since, to complete the agriculture sector’s first blockchain commodity transaction.
“What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure”.
However, HSBC says that blockchain technology helps to update the traditional paper process in trade finance. Thus, that takes around 5 to 10 days to exchange documents. Comparatively, in the Cargill transaction using blockchain technology, the exchange process was completed within 24 hrs.