HSBC and one of its corporate clients in the UAE have built a new blockchain-based supply chain platform called ReChainME and completed two live pilots that linked it with the Voltron blockchain application for letters of credit.
It is the first time Voltron has been connected with another blockchain platform.
Initiated by Landmark Group, a multinational retail conglomerate based in the UAE, ReChainME is a solution for the exchange of documents related to the physical supply chain. The platform, which is based on R3’s Corda blockchain framework, brings together buyers, sellers as well as logistics partners such as shipping companies and port authorities, enabling them to view documents and track progress of a shipment in real-time.
Voltron, meanwhile, which is also based on Corda, is a blockchain-based application for the issuance of digital letters of credit and run by eight banks, including HSBC. The consortium has already completed a range of live pilots in different industries and geographies.
“Voltron covers the financial aspects of a transaction, but is yet to onboard the physical counterparties, such as the shipping firms, port authorities, insurance companies, etc. So these transactions saw Landmark Group work with its logistics partners, technology companies and HSBC to create the aspects that are not there on Voltron today. That is ReChainME,” explains Sunil Veetil, HSBC’s regional head of trade for the Middle East, North Africa and Turkey.
The two pilot transactions involved shipments from Bee Dee Industries in Hong Kong to Babyshop, Landmark Group’s family retail brand in the UAE, with a letter of credit issued by HSBC on Voltron. It saw Voltron and ReChainME interoperate, meaning that data and documents could be seamlessly exchanged between the two platforms. The remaining partners involved in the transactions, including the technology firms that built the platform, have not been named.
“Around 300 documents are typically involved in buying a container, of, in this case, baby products moving from Hong Kong and throughout the entire flow of suppliers, testing services, port authorities, shipping companies and banks,” says Rajesh Garg, group CFO of Landmark Group. “Previously a lot of documents were duplicated. This is now synchronised, the entire data is now on the blockchain and all the parties have agreed to it.”
As a result, the time it takes to complete a transaction was reduced by seven and 12 days respectively in the two pilots, which is an up to 40% reduction. It also helped reduce the need for paper.
“The physical goods moved from Hong Kong to Dubai – we cannot expedite that,” explains Veetil. “But you will have seen cases where the documentation process takes longer than the physical movement of goods and the documents are still being negotiated with the banks while the goods are lying in the port. That is dramatically cut short by this solution, so that’s the 40% benefit you are seeing, but as we become more efficient you will see this becoming 50 or 60%.”
It’s not just the time reduction that has made this transaction important for the parties involved. Veetil describes the pilot as a “significant milestone” in the development of blockchain for trade finance: it is the first time anyone has piloted Voltron’s interoperability with an independently built blockchain platform.
“What this proves is that applications on the Corda platform can talk to each other seamlessly,” he says. “We have the problem that there are many blockchain platforms now and they are not interoperable, so it is creating digital islands. It has raised the question of how are they going to talk to each other? What we proved here is that not only could we link the physical and financial aspects of the supply chain, but also create the technical link between separate platforms.”
Whether HSBC will use these learnings for other blockchain projects it is involved in is not set in stone yet. “We proved the interoperability is possible,” Veetil says. “We haven’t decided what we are going to do with it. HSBC has been working on multiple platforms, including we.trade, eTradeConnect, etc, and I’m sure all this with come together over a period of time.”
Meanwhile, the parties will seek to commercialise ReChainME, including adding more counterparties. Initially, the focus will be on Landmark Group, but the solution could well be expanded in the future.
“We now want to scale it up,” says Garg at Landmark Group. “The first objective is to improve the way we do business across all ports and across all our brands. And in parallel we will look at what makes sense for this to become a broader and bigger play beyond just serving us. We are aware that in a network world, the more complementary parties, and in some cases even competitors, there are on a platform, the more it will help remove friction.”
Veetil at HSBC adds that “the ultimate objective is that this could become a fantastic solution for us to offer to any client”.
As for Voltron, the consortium behind the solution is currently looking to establish an independent legal entity by the end of the year that can bring the platform into production. So far, Voltron tests have covered a range of sectors, including soybeans, plastic derivatives, metals and wool.