R3’s Blockchain Corda Used By HSBC and ING For The First Time
UK-based HSBC Holdings Plc. along with Dutch ING Bank NV, completed the first transaction based on the blockchain.
The transaction was credited to Cargill Inc. and was performed during last Monday. It was based on a shipment containing soybeans and transported from Argentina to Malaysia. The transaction relied on a distributed ledger technology or commonly known as blockchain platform named Corda, developed by the R3 consortium.
R3 Blockchain Network
R3’s own blockchain network is currently supported by 12 banks, including Bangkok Bank, ING, SEB & U.S. Bank, and of course HSBC among other international banking institutions, which could help the DLT technology broaden its borders and make it accessible to the mainstream public.
The use of blockchain technology eliminated the need for paper and/or other physical documents, while it drastically fastened the transaction process.
Under traditional circumstances, the same transaction would require from five up to ten days to be filled, exchanged and verified by the respective parties involved in the transaction. Using next generation DLT technology, the process was smooth and instant without the need for mortal interference.
Vivek Ramachandran, HSBC’s global head of innovation and growth for commercial banking, issued the following statement when asked about the transaction:
“This is an inflection point for how trade is conducted. With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous.”
“The reason why letters of credit have persisted is because of two real challenges — the absence of digital infrastructure and the challenge of coordinating multiple parties. This platform helps us overcome the first and I think the technology and everyone focussed on it gives us the impetus to go after the second now with hopefully much better results than we have seen in the past”
The use of blockchain technology in the IT sector seeks to make transactions of crucial data more reliable, secure and faster. With DLT technologies, companies are able to reduce the risk of fraud in letters of credit and other types of transaction with the use of smart contracts, as well as severely reduce the number of steps required for the transaction to happen.
Letters of Credit (LoCs) are the main way for vendors (importers and exporters) to trade with each other, as it eliminates problems such as the great distance between them, the different language and the different laws.
LoCs guarantee more than $2 trillion worth of transactions annually, but the process creates a great deal of paperwork and it is extremely time-consuming.
R3, while a silent player in this disrupting scene, has managed to establish some astonishing partnerships with major international central banks, including the Bank Of America.
The company uses a slightly different approach when it comes to blockchain technology, which is relatively close to IBM’s approach with Hyperledger. Corda is not a token, and you won’t find it or its mixed market cap used by projects using R3’s network in CoinMarketCap or similar cryptocurrency trackers.
While many banks attempted to join the blockchain train with Ripple and other similar transfer unions using blockchain technology as their basis, HSBC and ING are not your average banks, and they’re definitely on the verge of something that might revolutionize the scene and bring banking institutions closer to the future.
Featured image courtesy of Shutterstock.