European Banks to Build Trade Finance Platform Using IBM, Hyperledger

Blockchain may finally live up to its trade finance potential — thanks to IBM and Hyperledger.

A consortium of seven European banks (including Deutsche Bank, HSBC, Societe Generale, Unicredit, Natixis, KBC, and Rabobank) will build a blockchain-powered trade finance platform, built by IBM using Hyperledger Fabric.

“This is not a proof-of-concept or a pilot—we are building out a full production system,” James Wallis, vice president for blockchain markets and engagements for IBM, told Bank Innovation. “It’s the first production network with this many members.”

The project, which was announced today at the Money2020 Europe conference, will help further open financial doors for European small and medium enterprises, according to the announcement.

While trade finance has been one of the traditional areas of note for blockchain experimentation, actual implementation has been proceeding a bit slower; the key is not to try and re-invent an established process, according to Wallis, but to make that traditional process more effective. It comes down to trust, he added.

“With traditional trade finance, I have to be able to relay on the fact that you will pay when you receive [notice to pay],” said Wallis — which is where blockchain and technologies such as smart contracts will come in. “This platform has been designed from the ground up for enterprises,” said Wallis.

The platform will allow for faster, more transparent, and more secure trade — the blockchain big three — between the participating consortium banks, and thus for their smaller enterprise clients (as per the traditional rules of trade finance, these smaller enterprises will not trade on the blockchain on their lonesome, but will continue to rely on one of these seven banks).

The platform is targeted to go live at the end of 2017, according to Wallis — a speedy timeframe, but one that isn’t all that out of character for the world’s “oldest” startup.

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