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HSBC Completes Its First Trade Finance Transaction On Blockchain

HSBC has completed its first trade finance transaction on blockchain technology — and claims it’s the first to do so in the market, due to its single-system solution.

Reports in Reuters on Monday (May 14) said HSBC collaborated with ING to complete a transaction for Cargill last week related to a shipment of soybeans transported from Argentina to Malaysia. According to HSBC, while other firms have completed trade finance transactions using blockchain technologies, this transaction is the first to use a “single, shared digital application rather than multiple systems,” Reuters explained.

HSBC’s distributed ledger initiatives in trade finance aim to reduce reliance on manual, paper-based letters of credit, which are used to guarantee payment for global trade.

”The reason why letters of credit have persisted is because of two real challenges: the absence of digital infrastructure and the challenge of coordinating multiple parties,” said HSBC commercial banking global head of innovation and growth Vivek Ramachandran in an interview with Reuters. “This platform helps us overcome the first [challenge], and I think the technology and everyone focused on it gives us the impetus to go after the second now with hopefully much better results than we have seen in the past.”

According to the lender, which cited data from the United Nations, digitizing the Asia Pacific market’s trade-related paper could cut costs by up to 31 percent and reduce the time it takes to export products by up to 44 percent.

HSBC completed the transaction on R3’s platform Corda. The lender first announced in March that it was ready to pilot the solution after developing its proof of concept in 2016.

“The technology has come a long way,” said the FI’s senior innovation manager Joshua Kroeker in a media call in March about the pilot. “We’re much more comfortable with its security and scalability.”

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