HSBC, Standard Chartered and 10 other banks have developed a new blockchain-based trade finance platform to boost efficiency in the multi-trillion-dollar funding of international trade, according to Reuters. The announcement was made in Hong Kong on the last day of October.
The platform is to be called eTrade Connect and will allow a bank like HSBC, which is British based but Asia focused, to reduce the time it takes to approve trade loan applications to four hours, compared with the usual one-and-a-half days.
Other major banks who participated in the development of the platform include the Agricultural Bank of China and BNP Paribas and the platform has been supported by Hong Kong’s central bank, the Hong Kong Monetary Authority.
In 2017, trade transactions were worth over $9 trillion, but the industry is heavily paper-based, and follows processes and procedures that have changed little in decades, or even centuries. This arrangement slows down the speed of completing transactions and raises the costs, as so many intermediaries are involved.
Moreover, introducing blockchain technology into the banking system is expected to reduce the exposure to fraud in letters of credit (LoC) as well as reduce the number of steps in the process. As a result, banking consortia worldwide are looking at distributed ledger technology (DLT) as a way of streamlining a number of conventional banking processes.
The HSBC test run
HSBC said that it had used the purchase of supplies by furniture and household goods retailer Pricerite as a test run for the platform, and that the creation of the transaction, the exchange of funds and confirmation of receipt on eTrade had been successful.
Pricerite Chairman Bankee Kwan in a statement issued by HSBC, said: “Blockchain has transformed a cumbersome, complex process into a simpler but more secure and efficient way of conducting trade.”
The eTrade platform will collaborate with European-based digital trading platform We.Trade, which counts Deutsche Bank, UBS and HSBC amomg its participants, and uses similar technology, HKMA also revealed.