Banking titans Bank of America Merrill Lynch and HSBC have partnered with the Infocomm Development Authority of Singapore (IDA) to simplify financial trade processes using blockchain technology.
Using the Linux Foundation’s open-source Hyperledger Project, the two banks and the IDA have worked together to create an application serving the same purpose as a letter of credit (LOC). Letters of credit are typically used as a means to reduce risk between importers and exporters by sharing information between the two parties and their banks. LOCs serve as a guarantee from a bank stating that sellers will receive payment once the terms of a contract are met. By implementing blockchain technology, this information can now be shared using a distributed ledger, and trades can be executed using smart contracts.
According to Ather Williams, head of global transaction services for Bank of America Merrill Lynch,
We are continuously looking for ways to simplify and improve transaction processing for our clients. Blockchain has reshaped our thinking on how to make transaction processes more efficient and transparent for all parties. The success of this proof of concept is a significant development towards digitizing trade transactions, potentially resulting in considerable benefits to the supply chain process.”
Proof-of-concept for the application involves seven steps that show how distributed ledger technology can be used to authenticate data. The advancement aims to simplify the complex and labor intensive process of checking and authenticating documents between buyers, sellers, and financers. Details of posted transactions will be available in real time and secured by encryption, and discussions are reportedly already underway between other banks and corporate clients to build upon this technology for similar uses.
Read more here- “HSBC and Bank of America Merrill Lynch use Hyperledger Project for Blockchain-Based Trade Finance,” (Bylan Allison, International Business Times).