HSBC Leverages Blockchain Technology
Hongkong and Shanghai Banking Corporation (HSBC), one the world’s leading financial institutions with over $2.3 trillion in total assets, announced that it successfully used blockchain technology to finance an international shipment. According to a tweet by HSBC, soya beans were shipped from the South American country of Argentina to Malaysia for Cargill, a global provider of food and agricultural products.
HSBC presented a letter of credit for Cargill to ING, a Dutch lender and global and financial services company. Letters of credit are issued by banks to guarantee that the seller will receive payment from buyer(s) on the date specified in the letter. Normally, this formal process is quite cumbersome and inefficient because it requires a lot of paper work and is very time-consuming.
Corda Blockchain by R3
To conduct the soya beans transaction, HSBC used R3’s Corda blockchain. R3 is an organization that implements enterprise level blockchain solutions for various types of businesses. Corda is an “open-source distributed ledger platform.” Vivek Ramachandran, HSBC’s head of products and propositions, commented on this recent blockchain-powered finance trade:
“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.”
The shipment transaction was completed within 24 hours, according to HSBC and ING bank. This is clearly a lot more efficient than the average 5-10 day time period it usually takes for similar exchanges when using the traditional system. Moreover, blockchain experts believe that the immutable distributed ledger has the potential to disrupt several other industries such as insurance and healthcare.
First Blockchain Transaction to Have Commercial Applications?
Notably, a number of proof-of-concept transactions have been conducted using blockchain. However, an HSBC representative noted that the bank’s soya beans shipment transaction was actually the first to potentially have commercial applications. Lenders such as ING bank think that blockchain technology has the capability to process large amounts of information in an efficient and transparent manner.
In April, retail banking firm Santander partnered with Ripple to launch a blockchain-based solution for fast cross-border transactions. The enterprise-level solution is referred to as Santander One Pay FX and is built using Ripple company’s blockchain-enabled products. Reportedly, Brazil, Poland, Spain, and the U.K. are already using One Pay FX.