R3: Blockchain could boost trade finance
11 August 2016 New York
Image: Shutterstock
Using blockchain technology for trade financing could help grow revenue by 15 percent, according to tests by financial innovator R3 and a handful of its consortium banks.
R3 and the participating banks designed and tested two prototypes to demonstrate how distributed ledger technology could help address challenges in the global trade finance industry, which is valued at around $45 billion.
The group designed and tested self-executing transaction agreements, or smart contracts, using R3’s Corda distributed ledger platform to process letter-of-credit transactions and invoice financing, or accounts receivable, transactions.
According to R3’s estimates, as well as adding up to 15 percent in revenue growth, using the technology could reduce operational and compliance costs by 10 to 15 percent.
The prototypes were intended to provide a digital alternative to paper-based trade financing processes, making them faster, more reliable and more cost effective.
R3 also noted the value of the single record of trade that blockchain can provide, which could help reduce the risk of fraud, remove time-consuming reconciliation processes, and help improve credit and regulatory reporting.
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.”
R3 consortium members that took part in the trials included the likes of BNP Paribas, the Commonwealth Bank of Australia, ING Bank and Wells Fargo.
R3 and the participating banks designed and tested two prototypes to demonstrate how distributed ledger technology could help address challenges in the global trade finance industry, which is valued at around $45 billion.
The group designed and tested self-executing transaction agreements, or smart contracts, using R3’s Corda distributed ledger platform to process letter-of-credit transactions and invoice financing, or accounts receivable, transactions.
According to R3’s estimates, as well as adding up to 15 percent in revenue growth, using the technology could reduce operational and compliance costs by 10 to 15 percent.
The prototypes were intended to provide a digital alternative to paper-based trade financing processes, making them faster, more reliable and more cost effective.
R3 also noted the value of the single record of trade that blockchain can provide, which could help reduce the risk of fraud, remove time-consuming reconciliation processes, and help improve credit and regulatory reporting.
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.”
R3 consortium members that took part in the trials included the likes of BNP Paribas, the Commonwealth Bank of Australia, ING Bank and Wells Fargo.
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