HSBC, which is one of the largest banking and financial services organizations in the world has reportedly completed the world’s first commercially viable trade finance transaction with the blockchain, highlighting the advancements the technology has made.
HSBC successfully completed the trade transaction for U.S. food and agriculture firm Cargill. It involved a shipment of soybeans from Argentina to Malaysia. HSBC used a blockchain platform overseen by the consortium R3 to issue a letter of credit to ING to help Cargill complete the transaction, reports CNBC.
Letters of credit, or LOCs, are issued when the buyer and seller do not know each other and use their respective banks to secure payments. A LOC is issued by one bank to another and serves as a guarantee that the payment will be received by the seller under a set of pre-agreed conditions. This process takes a lot of time, up to days. However, blockchain promises to fix this problem.
The companies exchanged the information needed for the letter of credit in 24 hours, the banks said. That’s far quicker than the five to 10 days normally needed.
Vivek Ramachandran, head of growth and innovation at HSBC, said in a statement,
“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.”
They also used the Corda blockchain technology, by startup R3, to undertake the trade transaction. R3 is currently working with a consortium of banks to determine blockchain solutions for a range of issues.
With the technology making great headway with the world’s first commercially viable trade finance transaction, the applications of blockchain hold potential which could turn tables on a massive scale, totally flipping the face of technology.
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