- Article
- Innovation & Transformation
- Digital Adoption
Blockchain is transforming the future of trade finance
Find out how your business can benefit from the new secure and seamless Blockchain process so you can focus on growth.
In late-March 2019, HSBC completed the first blockchain trade transaction between Australia and China, a milestone that brings the digitisation of trade a step closer to commercial reality.
It is predicted that blockchain technology will reach wide spread adoption within the next three to five years.
Currently, documents under Letter of Credits are typically sent by traditional mail or couriers to all parties involved in a trade transaction – including the buyer, seller and all corresponding banks, which can be a time consuming process.
Digitising a Letter of Credit and sharing it will all parties on a secure blockchain platform offers greater security, enhanced transparency and makes business simpler and faster. It can reduce the time taken for exchanging documents, this currently takes between 5 to 10 days. This can be vastly reduced to within 24 hours using Blockchain technology allow all parties to review the documents in near real-time, which in turn reduces cost, risk and lead times and thus changing the future of Trade Finance.
According to SWIFT, around 43,000 Letters of Credit were issued into and out of Australia last year, underpinning USD42 billion of trade. Bain & Company estimates that blockchain could increase global trade volumes of $1.1 trillion by 2026, from the current base of $16 trillion.*
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Real Case Study
The Importer - China SDIC International Trade Nanjing Company Limited (SDIC Trade Nanjing), who are the operator of the largest B2B wool trading market in China.
The Exporter - Fox & Lillie is a wool exporter in Australia and a client of HSBC Australia.
The Process - Using Voltron, a blockchain-based documentary trade finance network, HSBC China issued a digitised Letter of Credit (LC) on behalf of SDIC Trade Nanjing. Fox & Lillie then reviewed, verified and uploaded their own trade documents to the platform to complete the transaction.
The Future - HSBC’s blockchain-enabled trade transactions has offered an insight into how the technology has the potential to revolutionise conventional trade finance and reduce the time frames and risk involved in cross-border trade.
*Sources
Rebooting a Digital Solution to Trade Finance, Bain & Company 2019 www.bain.com/digital-trade-finance
https://iwto.org/wool-supply-chain/
Issued by HSBC Bank Australia Limited ABN 48 006 434 162 AFSL 232595.
