A new blockchain-based trade finance platform, developed by HSBC, Standard Chartered and 10 other banks, was launched in Hong Kong on Wednesday to boost efficiency in the multi-trillion-dollar funding of international trade.
HSBC said on Wednesday the platform, eTrade Connect, had allowed the Asia-focused British lender to reduce the time it takes to approve trade loan applications to four hours, compared with the usual one-and-a-half days.
Other major banks who participated in the development of the platform — facilitated by Hong Kong's de facto central bank, the Hong Kong Monetary Authority (HKMA) — included Agricultural Bank of China and BNP Paribas.
Trade finance transactions were worth over $9 trillion in 2017, but the industry is heavily paper-based, and follows processes and procedures that have changed little in decades, or even centuries.
The use of blockchain technology in the banking industry is expected to reduce the risk of fraud in letters of credit (LoC) and other transactions used in trade finance, as well as cut down on the number of steps used.
Distributed ledger technology, or blockchain, may provide a means to streamline some of these processes, and a number of banking consortia around the world are working on ways of doing so.
The e-Trade platform in Hong Kong aims to improve efficiency and facilitate counterparties' ability to obtain finance by digitising trade documents and automating trade finance processes by leveraging the blockchain technology.
HSBC said on Wednesday among the first transactions created, exchanged and confirmed on eTrade was the purchase of supplies by furniture and household goods retailer Pricerite.
"Blockchain has transformed a cumbersome, complex process into a simpler but more secure and efficient way of conducting trade," said Pricerite Chairman Bankee Kwan in a statement issued by HSBC.
The eTrade platform will collaborate with European-based digital trading platform We.Trade, which counts Deutsche Bank, UBS, and HSBC as its participants, and uses similar technology, the HKMA said in a statement.