The R3 Blockchain consortium and over 15 of its member banks have successfully completed two prototypes that demonstrate how distributed ledger technology can address the key challenges facing the USD 45bn global trade finance industry, according to an industry announcement on Wednesday, August 10, 2016.
The banks designed and utilised self-executing transaction agreements, known as smart contracts, on R3’s Corda Blockchain platform to process accounts receivable (AR) purchase transactions, also known as invoice financing or factoring, and letter of credit (LOC) transactions. Both AR and LOC transactions are widely used methods of trade financing in global financial markets.
David Rutter, CEO of R3, commented:
“Trade financing is a crucial income stream for banks and provides an integral role in enabling businesses in different countries to trade with each other with certainty and peace of mind. However, the processes used to facilitate trade financing have become antiquated and unfit for purpose in today’s increasingly digital world. These trials have proved that the blockchain-inspired technology used on our Corda platform holds the key to transforming trade financing for modern financial markets.”
Traditional processes surrounding trade finance are largely paper-based and are therefore time consuming and prone to risk and fraud. Trade finance is a significant source of revenue for banks, but its once crucial role in facilitating international trade has been undermined by these inefficiencies. It has come under further threat as buyers and sellers have become able to communicate more easily and access an abundance of information and data about each other, providing greater legal certainty.
R3’s prototypes validate distributed and shared ledger technology as a digital alternative for trade financing that is significantly faster, more reliable and cost-effective. Estimates suggest that such technology has the scope to reduce operational and compliance costs of paper-based trade financing by 10 to 15% and provide a platform for banks to grow revenues by as much as 15%.
Distributed ledger technology’s ability to provide a single, immutable record of a trade, verified by all parties involved in a transaction provides a number of clear benefits for trade financing. These include a reduction in fraud risk, whereby a seller may submit the same AR invoice to a bank more than once, and removal of time-consuming reconciliation processes, which occur when a buyer’s payment information is not accompanied with the necessary data for banks to reconcile a payment with the relevant invoice.
Over 15 R3 consortium members were involved in the trials including Barclays, BBVA, BNP Paribas, Commonwealth Bank of Australia, Danske Bank, ING Bank, Intesa Sanpaolo, Natixis, Nordea, Scotiabank, UBS, UniCredit, U.S. Bank and Wells Fargo.
R3 is leading a consortium with over 50 of the world’s largest financial institutions to develop ground-breaking commercial applications for the financial services industry that leverage the appropriate elements of distributed and shared ledger technology.
Operating in New York, London and San Francisco, the R3 team is made up of financial industry veterans, technologists, and new tech entrepreneurs, bringing together expertise from electronic financial markets, cryptography and digital currencies.
The R3 Lab and Research Centre has quickly become a centre of gravity for collaborative research and testing of distributed and shared-ledger inspired technologies, and is where R3 works with its partners to define, design and deliver the next generation of financial infrastructure.
- 18 Organisations Launch The Convergence Alliance To Enable A New Open Data Economy Built On The Decentralized Web - July 9, 2019
- Bittrex Acquires Tradedash - July 3, 2019
- Korea’s Cube Systems Rolls Out New Blockchain eCommerce Platform - July 3, 2019
- Clinlogix Joins ALTEN Calsoft in Launching Blockchain for Clinical Trials - July 3, 2019
- Binance Charity forms alliance with 46 companies to unveil a stablecoin for the alleviation of period poverty - July 3, 2019
- Nestlé Breaks from IBM Food Trust Blockchain Group for New Milk Supply Chain Trial - July 3, 2019
- Tokeny Solutions Digital Asset Platform Gets €5 Million Backing from Euronext - July 3, 2019
- Blockchain Venture Capital Funding Reaches $822 Million in 2019 - July 1, 2019
- Toronto’s Creative Destruction Lab Joins Facebook’s Libra Association - June 19, 2019
- Australia’s Power Ledger to bring P2P Energy Trading to Austria - June 19, 2019
- Litecoin Foundation Teams Up With Bibox And Ternio On Special Edition Litecoin Debitcard - June 19, 2019
- US Legislators Call for Halt to Facebook’s Cryptocurrency Plans – And to Face Congress - June 19, 2019
- Hyperledger Welcomes Diverse Line-up of New Members for Identity Project - June 18, 2019
- Facebook Announces Calibra Digital Wallet and Libra Cryptocurrency - June 18, 2019
- MIT Professor Silvio Micali’s Algorand Project Announces Date for First Auction - June 6, 2019
- SEC sues Canadian Messaging Service Kik Selling Unregistered Securities in its $100 million ICO - June 4, 2019
- CrowdEngine Teams Up With Polymath Adding Security Token Issuance to List of Crowdfunding Services - June 3, 2019
- Bitcoin Inc. CEO Morgan Rockcoon Busted – 21 Months in Prison and Fines - June 3, 2019
- Reshaping a Nation’s Logistics Sector: Singaporean Blockchain Company PLMP Cuts Multimillion Dollar Deal With Indonesia - June 3, 2019
- Swisscom TV Opens Blockchain-based Art Gallery - June 3, 2019