The banking industry’s infatuation with blockchain technology is well known. In the forefront of the development of distributed ledger solutions for the industry is the tech giant IBM which is currently working on a trade finance solution for leading European banking institutions.
IBM identified the project addressing the present challenges faced by the trade finance segment following a survey conducted in collaboration with the Economist Intelligence Unit. Through this project, the company will be aiming to simplify the trade finance transactions for small and medium-sized businesses, states a recent report on one of the financial news publications.
Seven banks including Deutsche Bank, KBC, and HSBC will use the IBM’s blockchain solution. In a statement, the general manager of trade finance at KBC said,
“What we will have is a platform to bring buyers and sellers together and to make trade transactions very transparent… from the moment that a purchase order is issued up until payment… The first service that will be available for buyers and sellers is financing and risk coverage, and it will also include a track-and-trade system so that buyers and sellers can follow the physical transfer of the goods.”
The distributed ledger solution will allow all the parties to track documentation, without involving any third party in the verification process. By eliminating the paper trail, the whole process of trade financing can be completed in no time, as compared to the existing process that takes as long as a month for completion.
Once completed, the blockchain based trade financing platform can potentially cater to over 20 million SMEs in the European continent. While the adoption across the segment is not going to happen right away, it will definitely start the process, where organizations gradually start making use of the services to ensure smooth operations.
The platform is expected to be operational by the end of 2017. Other participating banks include Société General, Natixis, Rabobank, and Unicredit — all part of the Digital Trade Chain Consortium.