HSBC Holdings announced the world’s first commercial financing transaction using blockchain. This is an important step to increase productivity and reduce errors in multi-billion dollar international trade.
According to HSBC ‘s statement, HSBC and Dutch bank ING successfully transferred funds to Cargill , the food and agriculture group.
It is emphasized that the use of the blockchain technology in the banking sector will reduce the risk of fraud in letters of credit and other transactions, and will undo a few extra steps used in the past.
Credit letters are one of the most common methods used to reduce the risks between importers and exporters. By using this method, transactions in quantities greater than 2 trillion dollars can be guaranteed, but the process involving long paperwork and change can take 5 to 10 days.
Vivek Ramachandran , global head of innovation and growth at the HSBC commercial bank division, commented on this transaction:
“At the moment, buyers and suppliers use a letter of credit, typically concluded by physically transferring paper documents, to underpin transactions. What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure.”
According to a statement made by HSBC on the subject, a study conducted by the United States indicated that transferring documents and documentation for the whole Asia-Pacific region to the electronic system would increase the time required to export the product by 44 % and increase the costs by 31 %.
