Similar to a majority of its rivals, HSBC has sought to employ digital ledger technology or blockchain to simplify the conventional paper-based trade funding, which is usually a bureaucratic activity.
The initiative is noteworthy improvement in the employment of Voltron Trade Finance Platform, which was created by eight banks, inclusive of HSBC, BNP Paribas and Standard. Deals that use the platform have been mainly personal pilot scenarios so far, but Ajay Sharma, Asia-Pacific’s regional director of global trade and receivables finance at HSBC, said strides have been made towards an outright use at all levels and even commercially appropriate design for banks and financial institutions.
“We are hoping that we will have something by end of the year, maybe the first quarter of next year, where will we know from Voltron what it costs, at which point, a lot of banks who might be sitting on the sidelines will be able to make a decision. Clearly we are hoping that through this technology, the unit cost of doing a transaction comes down, along with other benefits, such as speed.”
HSBC said, quoting SWIFT information, that in 2018 alone, 1,2 million letters of credit -paperwork released by a bank guaranteeing a buyer’s settlement to a seller -worth US$ 750 billion were issued to and from China last year. MTC Electronic, headquartered in Hong Kong, exported LCD components and panels to its holding enterprise, Shenzhen MTC, located across the Hong Kong frontier.
The exchange of digitized documents was accomplished in 24 hours, compared to the norm of five to 10 days for traditional exchange of documents, the bank said. R3, in cooperation with eight banks, namely Bangkok Bank, BNP Paribas, CTBC Holding, HSBC, ING, NatWest, SEB and Standard Chartered, introduced Voltron last October in an attempt to digitize trade funding records and enroll more banks and corporations.
Last month, London-based financial services provider Standard Chartered finished a blockchain-based letter of credit deal with the Thai state-owned oil enterprise PTT Group, the first of its kind in the oil industry. While supplying an oil commodity from Thailand to Singapore, as a trial, digitizing and streamlining end-to-end data transfer was carried out between all participants.