The Voltron blockchain platform for letters of credit is set to enter its second pilot phase, before going into production in 2019.

Built by a group of 11 global banks on the Corda blockchain framework, Voltron was the first trade finance prototype to be showcased by R3 in mid-2017.

It then made headlines around the globe in May, when HSBC and ING announced they had conducted their first live, commercial trade finance transaction on blockchain for agrifood trading giant Cargill. The letter of credit was completed for a cargo of soybeans exported from Argentina to Malaysia, enabling transaction time to be reduced from a standard five to 10 days, to 24 hours.

Speaking at R3’s CordaCon conference earlier this month, James Bidwell, head of trade services project management at NatWest, one of the banks involved, said the industry is now seeing what is “probably the first development in letters of credit for 250 years”.

“We’ve done a live pilot transaction on the live code, and we’re now in a position to really move forward and build on that,” he said. “Over the next three to four months we’re going to have two more series of pilot phases, where we want to get a number of transactions done with a live code, and then effectively, and really excitingly, we are ready to go into production in 2019.”

While HSBC and ING were the first to conduct a live pilot, the next phases will see other banks use the Voltron platform as well. So far, NatWest, BNP Paribas and Standard Chartered are confirmed participants in the project, while R3 is still finalising discussions with the remaining banks about joining the next stage. Other banks in the original consortium include Bangkok Bank, BBVA, Intesa Sanpaolo, Mizuho, Scotiabank, SEB and US Bank.

“We were especially interested in how the clients would react,” said Chris Sunderman, blockchain initiative lead for trade finance services at ING wholesale banking, speaking at the same event. “The feedback we got was very promising, and it convinced us that we were on the right track. One of the remarks the client, Cargill, made was that it was user-friendly and gave them fast information on where we all were in the process. That gave us a lot of energy to continue with the project.”

He added that the pilot also gave them the opportunity to learn “what we missed” and what the parties now need to work on to improve client experience.

This includes the ability to integrate with existing systems such as Bolero and its electronic bill of lading (eBL) service.

“There was feedback from our clients that it would be easier if we have eBLs integrated,” said Dora Matheidesz, senior innovation manager in HSBC’s growth and innovation team. “If there are great systems out there, we don’t want to reinvent the wheel, we want to integrate and work with them. It will be important for us to work with financial services software providers to be able to reach as many clients as quickly as possible, and make it easy for people to access Voltron through various user interfaces.”

Bolero is already working with R3 to give its eBL service a blockchain upgrade and enable connectivity with networks on Corda.

The Voltron consortium will also be looking to expand the platform to involve other parties in the trade ecosystem, such as insurers, carriers and authorities.

“We have started this collaborative work between us, it’s great, but now we want to expand the work with clients and the ecosystem,” said Eric Henry, head of innovation in trade finance at BNP Paribas. “When we are talking about trade finance, it’s not only one buyer, one supplier, two banks. It’s much more complex. We need also to involve freight forwarders, carriers, port authorities, customs, insurers, inspection companies and so forth. So this is a start, we know that it will be a long journey.”

Voltron is one of two trade finance projects that R3 is running simultaneously. The other is Marco Polo, a platform for open account trade finance, which was released last week and is run by a consortium of 10 banks. The first products that will be released on this platform are receivables discounting and factoring, with banks set to start piloting in October. Like Voltron, Marco Polo is expected to be commercialised next year.

Some banks, including BNP Paribas, ING and NatWest, are involved in both Voltron and Marco Polo. Speaking to GTR last year, Sophie Wiberg Holm, project lead at R3, said that down the road, the larger strategy is “to see how these different trade finance initiatives can merge into a larger ecosystem of trade products”.

This proposition is welcomed by the participating banks. Commenting on an audience question about just that, Henry at BNP Paribas said: “Making a link between Voltron and Marco Polo makes sense. The trade finance scope is very large. It includes traditional trade but also open account. One day a client may issue an LC, but the day after he may prefer to do business on open account. So we need these two different approaches to interact, so that clients can use both solutions as they want and when they want.”