HSBC, ING Bank and Cargill Prove the Viability of Trade Finance on Blockchain

HSBC and ING Bank have successfully executed a live trade finance transaction for international food and agriculture conglomerate Cargill using the Corda scalable blockchain platform developed by enterprise software firm R3.

The blockchain transaction involved a bulk shipment of soybeans from Argentina to Malaysia, involving Cargill’s Geneva trading arm and a Singapore subsidiary. A Letter of Credit was issued using Corda by HSBC to ING. The two banks were acting on behalf of the Cargill entities.

For CFOs and treasurers, the transaction demonstrates the commercial and operational viability of blockchain as a solution to trade digitization. The traditional paper-based documentation related to letters of credit usually takes between 5 to 10 days. This transaction took only 24 hours.

Unlocking liquidity

The Letter of Credit transaction was an end-to-end trade between a buyer and a seller and their respective banking partners, completed on a single shared application rather than multiple systems.

“What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure,” says Vivek Ramachandran, HSBC’s head of growth and innovation.

“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.”

Rani Misra, Regional Treasurer, APAC, at Cargill, sees the “exciting potential” of extending blockchain technology into other areas of the company’s financial ecosystem.

“Simply put, we took a highly manual, complex transaction and made it more secure and efficient,” she says. Blockchain is “a key technology we are exploring and using with our own customers and, now, using for ourselves with the completion of this transfer on Corda.”

Power of collaboration

Corda is one of several blockchain platforms that have been developed to solve complex business problems, a group that includes Ethereum, Hyperledger Fabric, IBM Blockchain Platform, Quorum and Ripple.

“This transaction represents another major milestone for Corda as we work with the industry to make enterprise blockchain a reality in trade finance,” says R3 CEO David Rutter. “Corda enables the development of applications like this one that bring all parties together on a single, shared infrastructure while ensuring the highest levels of privacy and security.”

R3 and the group of 12 banks supporting the Corda application, which include HSBC and ING, aim to expand the network on an open basis to drive adoption across the industry.

“It’s exciting to see this transaction has been completed successfully with clear client benefits in speed and ease in execution,” says Ivar Wiersma, Managing Director, Innovation Wholesale Banking, ING.

“It shows the power of collaboration – collaboration with other ecosystems’ stakeholders like regulators, ports, customs and logistics providers such as large shipping carriers, and in particular, collaboration with other banks, even our peers.”

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