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Block chain distributed ledger technology is coming to trade finance and banking

Two groups announce new initiatives in the use of block chain technology in banking and trade.

Distributed ledger in trade finance from SCB, DBS and IDA

Standard Chartered Bank, DBS Bank and Infocomm Development Authority of Singapore (IDA) have successfully completed a proof of concept (PoC) delivering the world’s first application of distributed ledger technology to enhance the overall security of trade finance invoicing. The initiative will reduce risk around duplicate invoice financing for banks while preserving client confidentiality.

Gautam Jain, Global Head, Digitisation and Client Access, Transaction Banking, Standard Chartered, said, “This success lays the foundation for harnessing technology to achieve greater goals in the banking industry. As the world’s leading trade finance Bank, we continue to innovate and develop solutions to solve real world issues and more importantly contribute to the overall digitisation of trade and trade finance. We will continue to look at ways to collaborate and contribute to the overall growth of the industry.”

The PoC marks an important milestone in the digitisation journey of trade finance and the revival of global trade. With enhanced security brought into the overall process, it reduces the systemic capital risks arising from duplicate invoices between lenders in a market. This creates a more conducive trading environment which in turn should encourage more trading activities using invoice financing. 

The initiative allows banks to convert invoices into digital assets on a distributed ledger. This gives the participants the ability to access a single source of information for the status of invoices seeking financing across all the participating banks while preserving client and commercial confidentiality. This is done by utilising distributed ledger technology as a means to prevent duplicate financing of the same invoice by different banks. In addition, the initiative is envisaged to be an open ecosystem where neutral third parties can participate and verify the authenticity of the related trade documents being financed; further reducing the risk of financing duplicate invoices. 

In the next phase of the project, the working team will be looking at widening the participation to include other industry stakeholders, including government agencies such as Singapore Customs and other banks based in Singapore, to join as partners and contribute to the commercial adoption of this initiative.

Block chain in banking initiative

Nomura Research Institute (NRI), a leading provider of consulting services and system solutions, today announced it will develop a proof of concept (PoC) for implementing blockchain* technology with banking, in collaboration with SBI Sumishin Net Bank, Ltd. (SBI Sumishin). This study aligns with NRI’s dedication to promoting open innovation for new ventures, and is one of the first studies to be conducted with an internet banking firm to independently examine ways to apply blockchain technology to banking infrastructure. In October 2015, NRI also initiated a PoC for blockchain technology, focusing on the securities industry.

The PoC will examine business scenarios and validation items, prepare prototype systems based on these anticipated business scenarios and materialize ways to apply blockchain technology for banking. Dragonfly Fintech Pte. Ltd.**, an expert in blockchain technology development, will provide NRI and SBI Sumishin with the technology necessary to conduct the study.

“This PoC is a strong example of NRI’s continued commitment to open innovation, through collaborations with various firms, to create new value in the marketplace,” said Minoru Yokote, Senior Managing Director of NRI. “NRI is committed to examining technical challenges of blockchain and suggesting ways to apply this technology to the banking industry.”

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* blockchain: Underlying distributed ledger technology that supports the exchange of crypto currency and cryptographically secured financial assets.

** Dragonfly Fintech Pte. Ltd.: Founded in August 2015 by Makoto Takemiya who is the core developer of NEM. NEM is an innovative way to utilize blockchain technology to create a decentralized economy. Dragonfly Fintech uses NEM and Mijin technology to provide blockchain solutions for financial institutions.


This item appears in the following sections:
Cash & Liquidity Management
Partner Banking & ICM Solutions
Trade & FSC Management
Trade Finance
Trade Transaction & Payment Services

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