HSBC Holdings, a multinational banking and financial service major has become world’s first bank to perform a financial transaction using blockchain technology. The step marks a major boost to efficiency and reduction of errors in the multitrillion-dollar funding of international trade.
The transaction took place successfully by HSBC and Dutch bank ING for food and agricultural group Cargill. State Street and BNP Paribas were also among the financial institutions that have been involved in the project. While Blockchain consortiums Finastra and R3 will look into the technology side of things.
Use of blockchain technology in the banking industry is something still maiden at the moment and is expected to reduce the risk of fraud in letters of credit and other transactions as well as cut down on the number of steps used.
HSBC & ING Bank have used Corda blockchain technology to finance a shipment of soya beans from Argentina to Malaysia for food & agriculture conglomerate Cargill. Revolutionising the future of Documentary Trade. #TransformingTrade pic.twitter.com/MOBA1gQYIl
— HSBC (@HSBC) May 13, 2018
Vivek Ramachandran, global head of innovation and growth, HSBC said,
At the moment, buyers and suppliers use a letter of credit, typically concluded by physically transferring paper documents, to underpin transactions. What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure.
Letter of credit is considered as one of the most widely used ways that reduce risk between exporters and importers but the process creates a longer paper trail and requires about 5 to 10 days for document exchange.
HSBC is currently world’s seventh largest bank headquartered in Hong Kong with total assets of US$2.374 trillion.