Today HSBC announced it used the Voltron blockchain trade finance platform for a live Letter of Credit (LC) transaction between Australia and China. Fox & Lillie sent a shipment of wool from Australia to China SDIC International Trade Nanjing Company. Both companies are HSBC clients.
Voltron is a consortium of eight banks which is leveraging R3’s Corda technology to digitize the LC process with the benefit of cutting the processing time and cost. The banks are HSBC, ING, Bangkok Bank, BNP Paribas, CTBC Holding, NatWest, SEB, and Standard Chartered. The group is looking to expand the number of banks involved.
“China is the world’s largest issuer of LCs by value – almost $750 billion in 2018. Digitising this market will shake up trade finance in China – reducing the amount of paperwork required to complete a transaction, shortening turnaround time and greatly lowering the cost of trade,” said Ajay Sharma, HSBC’s Asia Pacific Regional Head of Global Trade and Receivables Finance.
“As a trading company, we’ve long dealt with issues in paper-based transactions including the lengthy time needed in the exchange of documents, delays caused by amendments and lack of security and transparency,” said Yang Xiaoxiong, Chairman of China SDIC International Trade Nanjing Company.
With a blockchain platform, security is enhanced because it’s possible to authenticate the source of data and documents.
Xiaoxiong continued: “We are ready to further explore the new technology more broadly together with our banking and trading partners.” The company operates the Nanjing wool market which is the largest in China.
According to a recent Bain report, distributed ledger technology could potentially increase trade by $1.1 trillion by removing barriers.
Voltron has run several live transactions. Last May, HSBC worked with ING for a shipment for soya beans from Argentina to Malaysia for giant agribusiness company Cargill.
In November there was a shipment of iron ore from Australia to China. In that case, BNP Paribas issued a LC on behalf of Cargill to HSBC Singapore acting for Rio Tinto.
The same month, ING Brussels and HSBC India ran a LC transaction for clients Tricon Energy an Reliance Industries.
Apart from Voltron, HSBC is also a member of the we.trade open account trade finance network that initially is targeting SMEs. Plus it’s participating in the eTradeConnect initiative in Hong Kong. In China, HSBC’s local subsidiary was named as a member of a domestic trade finance initiative orchestrated by the China Banking Association.