EU Banks Link To Pull SMEs Onto Blockchain

Top financial institutions around the globe are going in on blockchain in a big way, with massive investments in R&D and beyond. Larger corporations are exploring distributed ledger, too.

Now, seven major banks in Europe are looking to pull SMEs into the blockchain exploration.

Reports Monday (Jan. 16) said Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit have signed a memorandum of understanding to collaborate on a blockchain-based trade finance and supply chain tool. KBC has already developed the proof of concept for the solution, but with the additional six banks working together, the FIs will develop it into a working solution called Digital Trade Chain (DTC).

According to the banks, the DTC will target SMEs that struggle with both domestic and international trade payments. The DTC will connect buyers, suppliers, banks and transporters online and via mobile devices, the announcement explained, to support the creation and transport of secure digital documents on distributed ledger technology.

“Larger companies use documentary credit as a way of reducing the risks involved in doing business,” the banks said in their release, “but documentary credit is not always suitable for SMEs or for companies that prefer open account processes.”

Participating banks will maintain secure digital records over blockchain to accelerate and streamline the order-to-settlement process for SMEs, they added. Their joint venture will build out the solution and commercialize it for real-world use.

The seven banks aren’t the first to identify trade finance and smart contracts as a potential use case for blockchain. Last year, Bank of America and Microsoft joined forces to explore how distributed ledger technology could disrupt trade finance for the better. But the seven EU banks are some of the first to declare their emerging product as one for SMEs specifically.