HSBC Singapore announced on Monday it was joining forces with ING and agrifood group Cargill to conduct what it claims to be the first live, commercial trade finance transaction on R3’s blockchain platform, Corda.
According to HSBC Singapore, the blockchain transaction involved a bulk shipment of soybeans from Argentina, through Geneva’s trading arm of Cargill, to Malaysia, through Cargill’s Singapore subsidiary as the purchaser. A Letter of Credit was issued using Corda by HSBC to ING. The two banks were acting on behalf of Cargill entities.
HSBC reported the transaction demonstrates that blockchain as a solution to trade digitization, is commercially and operationally viable. Conventional exchanges for paper-based documentation related to letters of credit usually take between 5-10 days. This exchange was done in 24 hours. Vivek Ramachandran, HSBC’s Head of Growth and Innovation, stated:
“What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure. The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous. The quick turnaround could mean unlocking liquidity for businesses.”
HSBC also noted the faster documentation turnaround for each shipment could potentially lead to increased flexibility in liquidity management for businesses. This is a significant development for any organization involved in buying and selling goods internationally. The bank then reported that the success of this live transaction builds a firm foundation for the future of trade finance, especially for Singapore. Iain Morrison Head of Global Trade and Receivables Finance, HSBC Singapore, added:
“Singapore is both a global and regional trade hub. Our customers are thought leaders in using technology to optimise trade and this represents a key step towards the digitisation of trade.”