link441 link442 link443 link444 link445 link446 link447 link448 link449 link450 link451 link452 link453 link454 link455 link456 link457 link458 link459 link460 link461 link462 link463 link464 link465 link466 link467 link468 link469 link470 link471 link472 link473 link474 link475 link476 link477 link478 link479 link480 link481 link482 link483 link484 link485 link486 link487 link488 link489 link490 link491 link492 link493 link494 link495 link496 link497 link498 link499 link500 link501 link502 link503 link504 link505 link506 link507 link508 link509 link510 link511 link512 link513 link514 link515 link516 link517 link518 link519 link520 link521 link522 link523 link524 link525 link526 link527 link528 link529 link530 link531 link532 link533 link534 link535 link536 link537 link538 link539 link540 link541 link542 link543 link544 link545 link546 link547 link548 link549 link550 link551 link552 link553 link554 link555 link556 link557 link558 link559 link560 link561 link562 link563 link564 link565 link566 link567 link568 link569 link570 link571 link572 link573 link574 link575 link576 link577 link578 link579 link580 link581 link582 link583 link584 link585 link586 link587

Blockchain Could Maximize its Potential in the Industry of Trade Finance

Blockchain Could Maximize its Potential in the Industry of Trade Finance

A large number of companies, banks, financial institutions,

Blockchain consortia and even governments have focused on testing Blockchain technology’s potential in the industry of trade finance. Most notably, the Hong Kong monetary authority introduced the development of a Blockchain-based trade finance platform in March. Additionally, IBM announced its long-term strategy to focus its Blockchain development initiative on trade finance.

What is trade finance and why does it need Blockchain?

Trade finance refers to the financing for trade and it always involves a wide range of intermediaries, banks, and third-party services providers that are contracted to facilitate transactions and finance the trade. The most widely utilized method of payment within the industry of trade finance is an open account, in which business partners have their accounts with correspondent banks open for the processing multiple transactions.

Essentially, the aim of banks and companies that are currently utilizing the Blockchain to optimize trade finance operations is to replace traditional and inefficient financial networks with a smart contract-based protocol which can process, update and broadcast transactions in real-time. With Blockchain technology and its ability to secure transactions on a decentralized and immutable ledger, governments and companies are attempting to replace banks and intermediaries with a trustless financial network. Banks are also attempting to develop trade finance platforms based on the Blockchain to cut operating costs and manual verification time.

Joshua Kroeker, the senior product manager for global trade and receivables finance at HSBC, stated:

“As the largest trade finance bank in the world … we were interested in assisting corporates to track transaction flows, reconcile transactions through invoice or purchase order matching and reducing the risk of duplicate financing for the participating banks. This development puts Hong Kong at the heart of a global effort to digitize trade, making it easier, faster and cheaper for businesses.”

More Blockchain use cases

On February 7, the government of Dubai went as far to launch an actual pilot trade finance platform based on the Blockchain with IBM to streamline operations between banks and optimize various operations involved in the trade finance industry.

At the time, Ali Sajwani, group chief information officer for Emirates NBD Group, said:

“The bank has always had a culture of innovation and several of the bank’s most successful products and features can be attributed to this forward-thinking mindset. We are excited to participate in the ecosystem on streamlining the trade finance process using the futuristic Blockchain technology, which has the potential of transforming the way we conduct business between heterogeneous entities.”

At a recent event covered by Global Trade Review, Zach Piester, chief development officer of the Blockchain consultancy Intrepid Ventures, and Connie Leung, financial services industry director at Microsoft, reaffirmed the progress being made by organizations in implementing Blockchain technology on existing trade finance platforms. Leung of Microsoft further emphasized the increasing demand for Blockchain technology to fight financial fraud within the industry of trade finance.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member