Introducing Contour

Leveraging Blockchain technology to transform trade finance

Trade finance has entered a new era with the digitisation of trade. And HSBC is leading the charge, using blockchain technology to make trade finance simpler, better and faster. We are focusing on one of the most paper intensive processes – Letters of Credit (LC).

Since the groundbreaking Cargill deal in May 2018, we have successfully completed over 20 transactions worth millions of dollars in goods, across 16 different HSBC offices and seven independent financial institutions - Bangkok Bank, Bank of Ayudhya (Krungsri), Bank of China (Hong Kong), BNP Paribas, ING, Prime Bank and Vietcombank. Of note is the first cross-border LC transaction in China; the first end-to-end Cargill/Rio LC transaction with Chinsay and essDocs integration; and, the first cross-border RMB denominated LC on a blockchain platform. The three deals highlight how HSBC can help drive linkages across our global presence including the Greater Bay Area.

HSBC has also successfully completed market-first cross-border LC transactions in Bangladesh, UAE, India, Malaysia, Mexico, Oman, Saudi Arabia, Singapore, South Korea and Vietnam. The completion of these pilots builds on HSBC’s Reliance/Tricon and Rio Tinto/Cargill transactions in 2018, with the solution constantly improving through focused development between each pilot transaction.

Read about the UAE market first Blockchain transaction with Landmark.

These transactions have been executed on the Contour platform, built using R3’s Corda blockchain technology. Contour links together banks and corporates on a decentralized network for paperless trade and trade finance. Additionally, the platform open API is linked with an ever-growing number of partners like essDocs for electronic bills of lading (eBLs), Chinsay for contracts management and Tradecloud for B2B trades.

The blockchain Letter-of-Credit flow mirrors the existing letter of credit process (agreeing letter of credit terms, application, issuance, advising, amendment request and its approval, document presentation, discrepancy resolution, and bill settlement instructions). A single blockchain platform is used by all participants. eBL capabilities are integrated into the application, giving parties the option to transfer the eBL digitally through the platform in near real-time.

What is the Contour platform and what is its purpose?

The Contour platform was developed and invested by a consortium of eight banks (Bangkok Bank, BNP Paribas, Citi, CTBC Holding, HSBC, ING, SEB and Standard Chartered) and three delivery partners (Bain Consulting, CrytpoBLK, R3). HSBC holds an equity stake in, and a seat on the board of Contour PTE LTD

In the 2018 groundbreaking transaction with Cargill, Contour significantly shortened the document exchange time from a typical 5-10 days to 24 hours by digitising the communication between the parties and reducing the processing of paper-based documents

Contour’s objective is to provide a single, simplified channel to enable digitisation of the trade finance process, from issuance of LCs through to presentation/exchange of documents

Contour completed a successful beta phase in 2020 with participation of 20+ banks, 75+ corporates - across 19 markets in Asia, Middle East and Europe

Contour has already integrated EssDocs’s electronic bill of lading and will be collaborating with further ecosystem participants on a rolling basis

To date, using Contour, HSBC has completed pilot transactions with clients from over 16 markets with very encouraging feedback. Benefits have been tangible to both corporates and banks.

Why is this a significant step for our clients?

While there are digital solutions for documentary trade, their siloed nature leads to what the International Chamber of Commerce calls ‘digital islands’1. These kinds of digital solutions still need to be bridged using paper. New technology holds the promise of improved speed and processes and completely eliminating paper. However, realising these advantages requires a decentralised network, mirroring the decentralised nature of global trade. This is where blockchain comes in, making the trade process simpler, better, faster and safer. The records on blockchain are secured through cryptography. The design of Contour enables transaction data is only accessed by authorised parties. With this decentralised data storage set-up, corporates are able to trade safer.

Using blockchain technology, the Contour platform tracks and traces information as it moves between parties. It keeps all players in sync, reducing the need for reconciliation and speeding up your transactions, whilst providing you with end-to-end visibility. In the above transactions, this technology helped reduce the time taken for exchanging and checking documents, from the typical five to ten days to less than 24 hours.

Contour has a full open API capability allowing the platform to exchange information digitally with the ecosystem (e.g. eBL, ERP, contracting platforms etc).

The result of two years of pilot transactions and constant improvements and reiterations to the platform is that Contour accelerates the document flow of LCs by removing paper, enabling clients to accelerate their cash flow or get financed faster. This leads to increased trade volumes.

The future is now

A digitised world of global trade would drive trillions of dollars in new global trade flows and extend the benefits to smaller corporates as well as large. To effectively digitise this process and others requires users around the world to agree on a common process and a common network, and no bank, country, or corporate could ever accomplish this alone.

Traditional ‘FinTechs’ have attempted with centralised platforms, but this has been a barrier to scale as users are cautious to hand over sensitive trade data to a third party. This is why HSBC has invested in the development of Contour.

Contour uses the power of decentralisation to provide common tools and resources to help banks and corporates build a global network for trade, without having access to any transactional data. In 2020, Contour completed their beta phase involving over 75 corporates and 20 banks from 19 countries and they have started commercialising their platform in 2021.

While commercialisation has begun, the world of trade is vast. It could take another 3 to 5 years of collaborative work to gain critical mass. In the interim, clients are looking to increase the digital nature of their transactions to further drive process efficiencies by embracing existing digital offerings like electronic Bills of Lading, Mobile & Desktop Trade Applications, SWIFT for Corporate for Trade, etc. This will only serve to make the move to blockchain more beneficial.

We remain focused on working with other global and local financial institutions and governments, to ensure that we empower businesses like yours, by revolutionising trade finance.

Click on ‘Get in touch’ to find out how Contour can transform your trade.

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