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Banks develop blockchain platform for trade finance

Asia / 17-12-15 / by

Standard Chartered Bank, DBS Bank and Infocomm Development Authority of Singapore (IDA) have developed proof of concept (PoC) for a blockchain-based invoice trading platform.

This is the first such application of blockchain technology to the trade finance space developed by banking institutions.

The project uses Ripple’s distributed ledger technology to underpin a platform for tracking invoices, backing loans to suppliers, reducing risk of invoice duplication while retaining client confidentiality. “It was essential to choose an open-source, consensus-based protocol for our PoC. Ripple was as good as any; we continue to explore what would be the right protocol as this space is fast evolving,” Gautam Jain, Standard Chartered’s global head, digitisation and client access for transaction banking, tells GTR.

The platform allows banks to convert invoices into digital assets on a distributed ledger. Since the participants are given a cryptographic identity, confidentiality is preserved, while the information on the status of invoices seeking financing is accessible to all users. The initiative, for which a commercial name is yet to be decided, is envisioned as an open ecosystem where neutral third parties can participate and verify the authenticity of the trade documents being financed.

“We believe we can substantially reduce the risk of duplicating invoice financing using the distributed ledger and soon we will start looking at other trade instruments like the bill of lading,” says Jain. “In time, we believe that the assembly of all the various documentation and processing stages involved in a trade transaction can happen on a distributed ledger.”

The platform has been built for Singapore, for in the next six months, Jain thinks that the project can be commercialised with more banks joining in the efforts. “We will be concentrating on extending the views of this proof of concept to other organisations so it will become a community effort. We look forward to working with more collaborators as we widen the project scope and are very optimistic on quick commercialisation in 2016 itself.”

From planning to production, the project took about six months, with the costs shared between the organisations, although the specifics cannot be disclosed as yet. According to Jain, the main costs went into building a common platform and interface, as well as maintaining the platform and ensuring it operates efficiently.

DBS and Standard Chartered found they could work well together given their presence in Singapore and their shared interest in fintech and innovation. “It was just very natural for us to partner,” Jain explains.

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