Hongkong and Shanghai Banking Corp (HSBC) India and ING Bank Belgium have jointly executed a trade transaction using blockchain enabling cross border payment from a US-based company to India’s Reliance Industries in a totally digital form.
“We are excited to partner with HSBC on digitalisation of trade finance. This reflects our continued commitment to embrace emerging technologies and industry first initiatives. The use of blockchain offers significant potential to reduce the timelines involved in exchange of export documentation from the extant 7 to 10 days to less than a day,” said Srikanth Venkatachari, Joint Chief Financial Officer, Reliance Industries.
HSBC said the transaction has validated the commercial and operational viability of blockchain as an alternative to conventional exchanges for paper-based documentation. At present buyers and sellers use paper-based letters of credit (LCs) to complete transactions, which have to be sent to each party by post, courier or fax increasing costs and chances of delay.
Eight banks namely, HSBC, ING, Bangkok Bank, BNP Paribas, CTBC Holding, NatWest, SEB and Standard Chartered together with US-based enterprise blockchain software firm R3 are working on an open source-based system with plans to expand the network and drive adoption across the industry.
When adopted at scale, blockchain technology helps in significant optimisation of working capital.Further, use of blockchain in trade finance enhances transparency, security and synergy across all the parties and stakeholders involved.