Tech giant IBM is building a blockchain-based platform for seven big European banks, including HSBC and Deutsche Bank, that is aimed at simplifying trade finance transactions for small- and medium-sized companies.
Trade finance was identified by a survey of banks carried out by IBM and the Economist Intelligence Unit last year as one of the top areas where blockchain – the underlying technology behind bitcoin – could have an impact.
Blockchain technology provides an electronic record-keeping and transaction-processing system, which lets all parties track documentation through a secure network and requires no third-party verification.
This contrasts with the present process – trade finance transactions typically involve a complicated paper trail that requires international courier services, is vulnerable to document fraud, and can take as long as a month to be completed.
« 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, » said Hubert Bdenoot, general manager for trade finance at KBC, one of the banks in the consortium.
« 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, » he told Reuters.
The « Digital Trade Chain Consortium », which also includes Societe Generale, Natixis, Rabobank and Unicredit, is aiming for the platform to be up-and-running and available for SMEs to use by the end of the year.
« There are over 20 million SMEs in Europe, and they provide around 85 percent of the jobs as well, so it’s a critical part of the economy and so anything that can facilitate growth in the SME community is going to help a lot, » said Keith Bear, vice president for financial markets and head of blockchain at IBM.
But KBC’s Bdenoot said the new platform was unlikely to suddenly revolutionize the market.
« I don’t think this is going to be something that enters the market and then all of a sudden half of the SMEs are on the platform – I don’t think that’s realistic, » he said.
« I think this is something that has to grow, but which will create a halo effect in the market. »
(Reporting by Jemima Kelly; editing by Susan Thomas)
