Major banks forge ahead with blockchain
(11 August 2016 – Global) A joint venture between HSBC and Bank of America Merrill Lynch announced this week that they had created ways of using blockchain technology to simplify trade finance processes.
The two banks said they had joined with the Infocomm Development Authority of Singapore to emulate a letter of credit (LOC) transaction, one of the most widely used ways to reduce risk between importers and exporters, helping guarantee more than US$2 trillion worth of transactions.
At the same time, R3, a global consortium of banks and financial institutions said that more than 15 of its member banks have also designed self-executing transaction agreements, known as smart contracts, on R3’s distributed ledger platform to process accounts receivable purchase transactions, known as invoice financing or factoring, and LOC transactions.
By putting the transaction on a distributed ledger, the importer and its bank, together with the exporter and its own bank, can see the data in real time.
HSBC’s global head of product for trade finance, Vivek Ramachandran told reporters that discussions are underway with other banks, corporate clients and shipping companies to further develop the technology, which is in its early stages.
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