HSBC Says Trade Deal Shows Blockchain Viable for Trade Finance

HSBC Says Trade Deal Shows Blockchain Viable for Trade Finance

HSBC Holdings said on Monday it has performed the world's first trade finance transaction using a single blockchain platform, in a push to boost efficiency in the multi-trillion-dollar funding of worldwide trade.

HSBC and Dutch bank ING completed the deal for Cargill last week when a shipment of soybeans was transported from Argentina to Malaysia via the global commodities trader's Geneva and Singapore subsidiaries, the British lender said in a statement.

Together with ING Bank NV, the London-based bank handled a letter of credit for Cargill Inc. which relied on the blockchain technology developed by the R3 consortium, according to an emailed statement on Monday. Blockchain technology has the potential to enhance the efficiency by reducing the risk of fraud, while cutting down the number of steps in the process.

Referring to a study by the United Nations, HSBC said that switching to an electronic system could reduce the time it takes to export goods by up to 44 percent and lower costs by up to 31 percent.

"The next stage is actually encouraging as many participants as possible to sign up to the utility", said Vivek Ramachandran, head of innovation and growth for commercial banking at HSBC.

As we previously reported, the group has been testing blockchain based solutions since 2016.

Ramachandran said HSBC already had another client lined up for the next similar transaction. What would normally be a lengthy exchange of paperwork taking between five and 10 days to complete under traditional systems was completed in less than 24 hours under the new system.