Reliance Industries Ltd (RIL) has partnered with HSBC to execute the first blockchain-enabled trade finance transaction.
HSBC is the 7th largest banking and financial services firm in the world, whereas Reliance is the largest private sector company in India. The aim of blockchain-enabled transaction is to reduce the time required in exporting documentation from around 10 days to less than a day.
The transaction, a Letter of Credit (LC), was processed by exporting a shipment from Reliance Industries to Tricon Energy.
“We are excited to partner with HSBC on digitalisation of trade finance. This reflects our continued commitment to embrace emerging technologies and industry first initiatives. The use of blockchain offers significant potential to reduce the timelines involved in exchange of export documentation from the extant 7 to 10 days to less than a day,” said Srikanth Venkatachari, Joint Chief Financial Officer, Reliance Industries.
“When adopted at scale, it helps in significant optimisation of working capital. Further, use of blockchain in trade finance enhances transparency, security and synergy across all the parties and stakeholders involved.”
Currently, the buyers and sellers use paper-based LCs to underpin transactions. Hence, physical documents are sent to each party in the transaction via post, courier or fax. One advantage of physical documents is certainty, however, it takes a lot of time and cost in processing.
The companies said that the new solution brings together all parties onto one platform. It will help organizations that are involved in buying and selling goods internationally.
The blockchain transaction will validate the commercial and operational viability as an alternative to conventional exchanges for physical documentation.
“The use of blockchain is a significant step towards digitising trade. It has a transformative impact on trade finance transactions and enables greater transparency and enhanced security in addition to making it simpler and faster,” commented Hitendra Dave, Head-Global Banking & Markets, HSBC India.
“The overall efficiency it brings to trade finance ensures cost effectiveness, quicker turnaround and potentially unlocks liquidity for businesses. We’re delighted to partner with Reliance Industries and support enhanced digitisation in trade finance. We believe that the collaborative approach adopted to develop this technology has the potential to transform conventional trade finance.”
The companies executed the blockchain transaction on R3’s Corda blockchain platform. The Corda is an open source blockchain platform that removes costly friction in business transactions by enabling companies to transact directly using smart contracts.
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For issuance of Letter of Credit, Reliance (exporter) used HSBC India, whereas Tricon Energy (importer) used ING Bank.
