Banking News

Hong Kong conglomerate deliver blockchain proof of concept for trade finance

(3 April 2017 – United Kingdom) A collaborative effort between Hong Kong’s central bank, Deloitte and five banks including Standard Chartered and HSBC has delivered a successful proof of concept (PoC) demonstrating the application of Distributed Ledger Technology (DLT) in trade finance.

The other banks involved were Bank of China, Bank of East Asia and Hang Seng Bank.

Deloitte has been working with the Hong Kong Monetary Authority (“HKMA”) and the banks to develop a DLT proof of concept for trade finance

The project, focusing on trade finance has resulted in the design and development of a proof of concept leveraging DLT to create a platform for banks, buyers and sellers, and logistics companies.

According to a statement from Deloitte, this proof of concept has demonstrated the application of DLT in digitising paper-intensive processes through smart contracts, reducing the risk of fraudulent trade and duplicate financing, and improving the transparency and new product innovation of the industry as a whole, strengthening Hong Kong as a major trade finance hub.

Commenting on the announcement, Executive Director of the HKMA, Li Shu-pui said: “We are very pleased to see this industry-led fintech effort on trade finance. The proof of concept result has shown the potential of using Distributed Ledger Technology for trade finance though there are still a number of matters such as legal, regulatory and governance issues which need further consideration. We will continue to work with the banking industry to explore the possibility to materialise the value proposition of this proof of concept work. ”

Gautam Jain, Global Head, Digitisation and Client Access, Transaction Banking, Standard Chartered, said: “At Standard Chartered, we firmly believe that we can leverage DLT to transform today’s Trade Finance solutions, and deliver improved efficiency and greater transparency to our clients and their ecosystems. This is why we are very excited to be working with HKMA to complete this DLT Smart Contract prototype for Open Account Trade Financing. We see significant potential in the application of Smart Contracts in Trade Finance and will continue to work with industry partners and regulators to make this a reality in the near future.”

Joshua Kroeker, Senior Product Manager for Global Trade and Receivables Finance, HSBC said: “This development puts Hong Kong at the heart of a global effort to digitize trade, making it easier, faster and cheaper for businesses. At HSBC we’re working with distributed ledger technology because we believe it has huge potential as a catalyst for change, and we’re excited to be innovating here in our home market.”

“Nearly half of the trade transactions in Hong Kong fail to obtain financing due to the lack of trust and potential fraudulent loss,” said Paul Sin, a partner with Deloitte China who leads the fintech practice. “We are glad that HKMA and the leading banks in Hong Kong are driving the use of DLT to infuse transparency and trust into the ecosystem, not to mention the potential productivity gain in the currently labour-intensive process. With great vision and determination, Hong Kong is well positioned to lead the region on trade finance DLT application.”