HSBC says performs first trade finance transaction using blockchain

HSBC Holdings Plc said on Monday it has performed trade finance transaction using blockchain technology for US food and agricultural products company Cargill, making this the first such transaction via blockchain by any financial group.

The exchange was performed between HSBC and ING in 24 hours, compared to the five-to-10 days it normally takes to complete such exchanges through a paper-based system.
The transaction involved a bulk shipment of soybeans from Argentina to Malaysia. The letter of credit was issued from HSBC to Dutch lender ING.
Letters of credit are issued by one bank to another to ensure that a payment will be received by a seller for fulfilling certain conditions. 
It requires a large amount of time, several paper records need to be maintained, and a flow of correspondence between the various parties involved. 
Blockchain technology enables transactions to be recorded across a vast network of computers recording them in a decentralised ledger obviating the need for paper contracts, certificates or manual checks in a transaction using the current systems
HSBC used a platform developed by blockchain start-up R3 called Corda. R3 works with a consortium of banks to come up with blockchain solutions to a variety of problems.
The use of blockchain technology in the banking industry is expected to reduce the risk of fraud that exist in letters of credit and other transactions and also cut down on the number of steps used.
Currently letters of credit  are used for facilitating over $2 trillion worth of transactions, 
“At the moment, buyers and suppliers use a letter of credit, typically concluded by physically transferring paper documents, to underpin transactions,” Vivek Ramachandran, global head of innovation and growth at HSBC’s commercial banking unit said in a statement.
“What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure.”
The transaction for Cargill could be replicated if the same counterparties were involved, HSBC said.