HSBC, ING Conduct Trade Finance Transaction Using Blockchain

Blockchain, Innovation | May 14, 2018 By:

Banking and financial services organization HSBC and Dutch bank ING have conducted their first live trade finance transaction using blockchain technology. The value of the transaction has not been disclosed.

HSBC and Dutch bank ING successfully completed the transaction for US-based agriculture company Cargill. A shipment of soybeans was transported from Argentina to Malaysia ` via Cargill’s Geneva and Singapore subsidiaries. The transaction was financed using a letter of credit (LC), a banking document that guarantees payments between organizations, completed digitally on R3’s Corda blockchain platform.

The LC was issued by HSBC, with ING acting as the advising bank. The transaction was an end-to-end trade between a buyer and a seller and their respective banks that was completed on one shared digital application rather than multiple systems. HSBC said R3’s Corda blockchain platform enabled the transaction time to be reduced from a standard five to 10 days, to 24 hours.

Citing statistics from the United Nations, HSBC claims that digitizing trade could reduce transaction time by 44 percent, reduce costs by 31 percent and save the industry $257 billion per year.

“At the moment, buyers and suppliers use a letter of credit, typically concluded by physically transferring paper documents, to underpin transactions,” said Vivek Ramachandran, global head of innovation and growth at HSBC’s commercial banking unit. “With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous. What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure.”

HSBC had been involved in one of the earlier blockchain projects for trade finance when it worked with Bank of America Merrill Lynch and the Infocomm Development Authority of Singapore (IDA) in 2016 on a proof of concept to mirror letters of credit using DLT.

ING has also been heavily involved in the trade-based developments on blockchain technology. It is one of the core members of Marco Polo, an initiative focused on a trade finance platform built on an interoperable business network powered by open Application Programming Interfaces (API) and blockchain technology.

Earlier this year, ING and Zurich-based financial services company Credit Suisse have successfully transferred securities worth €25 million ($30M USD) over R3’s Corda blockchain platform.