HSBC Holdings has claimed the world's first commercially viable trade-finance deal using blockchain technology, potentially opening the door for mass use.
The bank said it has successfully completed a transaction for food and agricultural group Carhill, processing a letter of credit for the shipment of soya beans from Argentina to Malaysia.
HSBC used the Corda blockchain platform, which it developed in partnership with a number of other banks such as ING, BNP Paris and State Street, with the technology side provided by consortium R3 and Finastra.
The blockchain distributed ledger technology, which underpins cryptocurrencies such as Bitcoin, has the potential to be used for encrypted and unhackable record-keeping across a number of industries.
"The next stage is actually encouraging as many participants as possible to sign up to the utility," said Vivek Ramachandran, head of innovation and growth for commercial banking at HSBC.
It is hoped the use of blockchain in banking will help trim the risk of fraudulent transactions and cut back the number of steps needed in the process and speed up single transactions, which can take up to a week, to a matter of hours.
Letters of credit are one of the most widely used ways of reducing risk between importers and exporters, but the process creates long paper trails and takes between five and ten days to hand over documentation.
"At the moment, buyers and suppliers use a letter of credit, typically concluded by physically transferring paper documents, to underpin transactions," added Ramachandran.
"What that means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure."
HSBC is not alone in looking at ways blockchain technology can be used to do more than just support cryptocurrenices. IBM has been testing the technology as a way to track precious stones in jewellery.
Image credit: Shutterstock
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