Eleven FI members of the R3 platform consortium have announced the next step in using the distributed ledger technology for trade finance.
The banks announced news on Monday (Aug. 7) that they have developed a prototype application on R3’s blockchain platform, Corda, that aims to digitize and streamline letters of credit for trade finance transactions.
The banking firms include Bangkok Bank, BBVA, BNP Paribas, HSBC, ING, Intesa Sanpaolo, Mizuho, RBS, Scotiabank, SEB and U.S. Bank.
“Like so many of the processes and systems banks are forced to use today, the infrastructure that supports trade financing is extremely outdated and prone to risk and error,” said R3 CEO David Rutter in a statement. “The work we have been doing with our members over the last year has shown that this challenge no longer needs to stand in the way of giving businesses access to the services they need to trade across borders. The application we have built is the first of its kind, and we look forward to rolling it out to our Corda users across the world.”
In its announcement, R3 said that the group of 11 banking firms has been working with CGI for a year to develop a number of trade finance applications that use blockchain technology. That exploration led the group to develop the prototype trade finance app, the firm explained, that includes shippers and carriers.
The banks said they are aiming to make the solution available to their own corporate clients next year.
“While LCs [letters of credit] have not progressed as much as the open account business in recent years, they remain a good way to finance trade and mitigate risks,” said BNP Paribas Global Head of the Trade Competence Center Marguerite Burghardt in another statement. “If the industry manages to make the whole process fully digital, transparent and STP [straight through processing], this could mean renewed development and wider access to this financing technique.”