HSBC Holdings Plc is reporting that it has completed its first customer transaction using blockchain, noting it a turning point in the trades are conducted.
As we previously reported, the group has been testing blockchain based solutions since 2016. Earlier this year, Joshua Kroeker, senior innovation manager for HSBC, said it “should be in a position to have both the network of banks, corporates and others, and the app ready to use on a wider scale” by 2019. This appears to all be part of a pilot scheme that will see this product tested by its customers now that the bank is “much more comfortable with [the] security and scalability” of the technology.
That technology, provided by R3 Consortium – the same company that provided the systems Credit Suisse and ING recently used to complete a blockchain-based securities deal – saw the HSBC Holdings and (again) ING Bank NV handle a letter of credit for Cargill Inc., backing a delivery of soybeans to Malayasia. The end-to-end transaction was all completed using one shared app rather than across multiple systems, Bloomberg says, and has been claimed as the first scalable live trade finance transaction using blockchain. What would normally be a lengthy exchange of paperwork taking between five and 10 days to complete under traditional systems was completed in less than 24 hours under the new system.
According to Reuters, letters of credit – such as was transferred here – are one of the most widely used methods of risk reduction used by importers and exporters, “helping guarantee more than $2 trillion worth of transactions”, but creating large amounts of paperwork in the process.
In its press release HSBC’s global head of innovation and growth for commercial banking, Vivek Ramachandran, marked the significance of the moment by calling it the deal “an inflection point for how trade is conducted.”
“With blockchain,” he continues, “the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous.”