Seven European Banks Hire IBM To Develop Blockchain Trade Finance Platform
A group of banks in Europe have selected IBM to build a blockchain platform that is to be used by small businesses to finance cross-border orders. The banks led by Deutsche Bank, HSBC, KBC, Natixis and Unicredit expect the new technology to transform trade finance as they seek to do away with the current systems that take up to days to finalize transactions.
KBC has already developed a precursor to the new system and has trialed it with small businesses customers in Belgian. However, the long-term plan is to partner with the other seven banks to leverage blockchain technology in offering trade finance over a cloud-based platform.
“We are convinced that blockchain will have a huge impact on banks in the future and that trade finance is one of the biggest areas of potential for the technology. Trade finance is an obvious way to use blockchain because [at present] it is very paper-based, complex and pricey,” said Rudi Peeters, chief information officer at KBC.
The banks plan to expand the platform currently in use by KBC to include inter-continental shipping routes even though the short-term goal is to enhance its capability in handling European trade routes. The platform is to be expanded to include other banks as well as Freight forwarders and credit agencies.
The platform will address exporter’s risks across border trades while enabling financing and the mentoring of transactions. The end game is to make financing simpler cheaper and much faster. The platform will also include a directory function that allows customers to find potential trading partners.
SMEs will be able to use the protracted blockchain platform to track orders and use smart contracts to trigger payments on certain events. The platform would be cheaper than other forms of financing for SMEs.
This won’t be the first time that financial institutions have come together to develop a blockchain system to enable trade finance transactions among SMEs. Last year Barclays teamed up with Israeli startup, Wave, to carry out the first trade finance transaction over blockchain technology.
IBM is seen as the perfect partner for developing the blockchain platform for financing trade, because of it track record of coming up with systems based on the emerging technology. The tech giant has already launched a blockchain platform that is being used by the world’s biggest container shipping line Maersk. The system is being used in supply-chain to track shipments around the world.