HSBC and ING tested R3's Corda platform, which uses blockchain technology, for a transaction that involved the purchase and shipment of Soybeans from Argentina to Malaysia. The blockchain-based transaction was completed in 24 hours, Bloomberg says.
LoCs are the widely used way of financing between importers and exporters, helping guarantee more than $2 trillion worth of transactions, but the process creates a long paper trail and takes between five and 10 days to exchange documentation.
The fact that the trade could be replicated if the same counterparties were involved made it an advance on previous trials using blockchain technology, according to Vivek Ramachandran, head of innovation and growth for commercial banking at HSBC.
"The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous". It was developed by R3, a blockchain consortium based in NY.
The incentive? HSBC sees blockchain as a solution to help boost efficiency in the multi-trillion-dollar funding of global trade.
Citing statistics from the United Nations, HSBC claims that digitizing trade could reduce transaction time by 44 percent, reduce costs by 31 percent and save the industry $257 billion per year.
Banking giants HSBC and ING on Monday said they had carried out a landmark blockchain transaction aimed at speeding up payment processes and making them more secure. The blockchain application used in the Cargill transaction is supported by 12 banks, which could help bring the technology to the market more broadly.
In an announcement, HSBC said it could replicate Cargill's end-to-end digital ledger transaction with the same counterparties. It is one of the core members of Marco Polo, an initiative focused on a trade finance platform built on an interoperable business network powered by open Application Programming Interfaces (API) and blockchain technology.