Banking News

Hong Kong’s blockchain trade finance platform prepares launch

Hong Kong

The blockchain based Hong Kong Trade Finance Platform will launch in September. The announcement came from the Hong Kong Monetary Authority (HKMA), Standard Chartered, HSBC, and five other banks.

The platform follows a trade finance proof of concept (PoC) initiated in December 2016 and completed in March last year.

The aim is to digitize documents and automate processes. By having a single version of the truth, a blockchain can help to prevent fraud. Howard Lee, deputy CEO of HKMA said: “The next major milestone of this project is to link up with other trade platforms in other jurisdictions to further facilitate cross-border trades.”

This alludes to a Memorandum of Understanding (MoU) signed last year with the Monetary Authority of Singapore to jointly develop the Global Trade Connectivity Network (GTCN). The MoU aims to connect up the two local trade platforms for cross-border trade to make financing cheaper, safer, and more efficient. At that stage, there was a target launch date of Q1 2019. They intend to expand the GTCN beyond the two countries.

Yesterday the Financial Times referred to the involvement of 21 banks, and perhaps those additional banks are part of the Singapore initiative.

Structure

The HKMA’s role is to ‘facilitate’ the banks in moving the platform forward. The group emphasized that it put a lot of effort into the business model and governance to make sure the design is scalable. Hence the project incorporated as the Hong Kong Trade Finance Platform Company Limited (HKTFPCL).
The other five banks are ANZ, Bank of China (Hong Kong) Limited, The Bank of East Asia, Limited, DBS Bank (Hong Kong) Limited, and Hang Seng Bank Limited.

Functionality and technology

The platform allows enrolled banks and companies to record purchase orders, invoices, and applications for finance using the blockchain. The stated aims are:

  • reduction in fraud
  • prevention of identity theft
  • increased credit availability
  • lower financing costs in the long run.

The digitization is expected to benefit SMEs the most.

Initially, the platform will support open account financing. But the platform will expand to support other products as well as participants outside of banking such as logistics.

Deloitte led the original PoC. For the production version, Ping An’s OneConnect is the technology provider, and Deloitte is providing consultancy.

The project uses the permissioned blockchain Hyperledger Fabric.

Comments

“We believe this new platform will help spur the digitization of both physical and financial trade supply chains, making the process more safe and efficient for our clients,” said Ivy Au Yeung, CEO Hong Kong, ANZ.

Vivek Ramachandran, Global Head of Growth and Innovation, Commercial Banking for HSBC said: “We believe Hong Kong is well positioned to benefit as one of the most active and dynamic trade markets globally. As the leading international trade bank, HSBC is committed to driving the transformation of trade, making it simpler, better, faster and more secure.”

HSBC is involved in at least two other trade finance blockchain consortia including we.trade and Voltron for letters of credit.

Biswajyoti Upadhyay, Regional Head of Trade, Greater China and North Asia, Standard Chartered commented: “As a top three trade bank in the world, Standard Chartered is well positioned to help our clients capitalize on this new digital platform to do business in a more efficient and secure manner amidst the more complex environment of global trade.”