Banks Complete First International Trade Transaction using The Blockchain

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The Commonwealth Bank of Australia, Wells Fargo and Brighann Cotton have undertaken the first global trade transaction between two independent banks using Blockchain, smart contracts and Internet of Things. The transaction involved a shipment of cotton from Texas, USA to Qingdao, China, using Distributed Ledger Technology (DLT).

The trade involved an open account transaction, mirroring a Letter of Credit, executed through a collaborative workflow on a private distributed ledger between the seller – Brighann Cotton  (US),  the buyer (Brighann Cotton Marketing Australia and their respective banks (Wells Fargo and Commonwealth Bank).

Cameron Austin, General Manager of Brighann Marketing Inc, said in at statement:

“The combination of these emerging technologies could eliminate many inefficiencies currently experienced in international trade. The benefits of lower costs and improvements to security through reduction of errors, risk and time, enable a company to achieve greater efficiency and have more predictable working capital.” 

The trade introduced a physical supply chain trigger to the terms of the transaction to confirm the geographic location of goods in transit before a notification is sent to allow for release of payment. The tracking feature adds a new dimension, providing all parties with greater certainty compared with traditional open account and trade instruments like Letters of Credit, which focus on documents and data.

cba-animated-experimentThe use of Blockchain technology creates transparency between buyer and seller, a higher level of security and the ability to track a shipment in real time. The advancement from paper ledgers and manual processes to electronic trackers on a distributed ledger reduces errors and accomplishes in minutes what used to take days.

Michael Eidel, Executive General Manager of Commonwealth Bank’s Cash-flow and Transaction Services, added: 

“Existing trade finance processes are ripe for disruption and this proof of concept demonstrates how companies around the world could benefit from these emerging technologies. We strive to stay at the forefront of disruptive technologies to understand how they can be used to enable greater efficiencies and solve the real world challenges our customers face. The interplay between Blockchain, smart contracts and the Internet of Things is a significant development towards revolutionising trade transactions that could deliver considerable benefits throughout the global supply chain.”

Chris Lewis, Head of International Trade Services for Wells Fargo, remarked:

 “Wells Fargo is committed to exploring emergent technologies and innovative concepts that benefit our customers.  In this case, we demonstrated how a new approach to trade could benefit a joint Wells Fargo and Commonwealth Bank customer, Brighann Cotton.  This marks another step in evaluating technology that, over time, could support the evolution of trade finance.  While significant regulatory, legal and other concerns remain to be addressed with the technology, we are committed to engaging with our partners to explore potential applications within trade finance.”

Following the successful completion of this transaction, Commonwealth Bank and Wells Fargo will continue actively collaborating with trade finance clients, financial institutions, fintech companies and consortiums like R3, as well players in the insurance and shipping industries, to ensure their clients benefit from the changes in technology across the global trade ecosystem.

Traditional trade process vs. Blockchain proof of concept

 

Traditional process

Blockchain, IoT & smart contracts

Transparency: All supply chain partners update data in real time within one system.

No

Yes

Cost efficiency: No physical documents or transportation. No risk of duplication or loss.

No

Yes

Customisable: Tailored, individual insurance policies

No

Yes

Convenient: All parties work off same ledger, all online and instant

No

Yes

Secure: Verifiable and immutable data to reduce fraud risk

No

Yes

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Founder of Blockchain News and The Hackitarians Foundation, Richard Kastelein is an award winning publisher and editor, hackathon organiser and entrepreneur. He has written over 700 articles at Blockchain News, has a massive network in the Blockchain arena and is available as a speaker and consultant. (richard@the-blockchain.com) Kastelein has spoken (keynotes & panels) on technology at events in Amsterdam, Barcelona, Belfast, Berlin, Brussels, Brighton, Copenhagen, Cannes, Cologne, Curacao, Frankfurt, Gdansk, Hollywood, Hilversum, Geneva, Groningen, London, Las Vegas, Leipzig, Madrid, Melbourne, NYC, Oxford, Rio de Janeiro, Sheffield, San Francisco, San Jose, Sydney, Tallinn, Vienna, and Zurich. A Creative Technologist & Canadian (Dutch/Irish/English/Métis) his career began in the Native Press (Canadian Arctic) and he later spent a decade in the Caribbean media. Currently, he writes occasionally for Wired Insights, Guardian & Virgin and his articles have been translated into Dutch, Greek, Polish, German & French.