Eight Banks Partner with R3 for Trade Finance

Blockchain consortium R3 is partnering with eight banks in a bid to make trade finance more efficient, with a focus on transacting letters of credit (LC).

Bangkok Bank, BNP Paribas, CTBC Holding, HSBC, ING, NatWest, SEB and Standard Chartered, along with Bain and CryptoBLK, comprise the initiative, dubbed Voltron. The plan is for a documentary trade open platform to begin production on R3’s Corda Enterprise blockchain in 2019. 

Corporate customers will be able to connect with their banks and trading partners through one channel for issuance of LCs, as well as presentation and exchange of documents across the network. Voltron allows trade documents produced on external networks by supply chain partners to be digitally sent, verified and processed, providing legal enforceability of title documents and allowing digitization of a process that is currently heavily paper-based.

Paula da Silva, head of transaction services at SEB, told WatersTechnology at Sibos 2018 that the initiative is trying to establish a standard by compiling the 15 most-used fields on an LC and bringing that to the blockchain. “With R3, we are trying to put the trade finance institutions on the blockchain… We are agreeing, with those eight banks involved, that at least for standardized LCs, we could really use [blockchain] in a good way. We’ve invested some money and we’re trying to put that in place. It’s difficult to agree unless you agree that’s a standard,” she says. 

In the ecosystem of a trade finance deal, there are usually several parties involved: insurer, customs, importer, exporter, importer bank and exporter bank. If they could all be on the same distributed ledger, the importer and exporter could have access to the information they need immediately, da Silva says. 

“The exporter can know what documents they need to prepare, and if they prepare the wrong documents, the ledger doesn’t accept it unless the other parties agree that it can be accepted,” she adds. 

According to da Silva, Voltron includes a good mix of banks from emerging markets and Europe. “I think we have a better chance now than before, when only European banks wanted to do this [and] we had no takers on the other side,” she says. 

The initiative is working with four trade finance platforms to design and build a solution that will offer its services to their existing bank and corporate customers, and is open to all banks and organizations applying to join.