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.
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.