Barclays and start-up technology company Wave announced the first execution of a global trade transaction using blockchain technology.
The letter of credit (LC) transaction between Ornua (formerly the Irish Dairy Board) and Seychelles Trading Company is the first to have trade documentation handled on the new Wave platform, with funds sent via financial messaging services provider SWIFT.
Barclays added that it hopes the “landmark” transaction will herald a new era of simpler, safer and faster trade finance. Current trade transactions of this nature often involve a high number of participants in different jurisdictions around the world, requiring a significant amount of paperwork, counter-signing and courier journeys.
Wave’s blockchain based system uses distributed ledger technology (DLT) to ensure that all parties can see, transfer title and transmit shipping documents and other original trade documentation through a secure decentralised network, eliminating many of the current inefficiencies in international trade. The system could potentially speed up trade transactions, reduce costs for companies and reduce the risk of documentary fraud.
Barclays expects the shipping industry and financial institutions to be among the biggest beneficiaries. The bank has identified substantial direct cost savings that can be made on courier costs alone using the Wave system, which could also reduce the time taken to complete an end-to-end trade finance transaction from days to hours.
Wave was one of 11 participants in Barclays Accelerator programme in New York last summer, working with the bank’s trade and blockchain team in the UK and South Africa to explore the various use cases of the technology. Barclays wants other banks to support adoption of Wave’s system in developing an industry-wide improvement in how trade documentation is managed.
“One of the biggest headaches in global trade currently is the vast movement of paper required to facilitate transactions, with multiple organisations in the chain,” said Baihas Baghdadi, global head of trade and working capital at Barclays.
“Effective use of blockchain technology really can have a huge impact on the future of trade,” added Gadi Ruschin, chief executive officer (CEO) at Wave. “By adopting our system, trade can be done more easily and more cheaply.
“Studies show that as much as 5% of the cost of a trade transaction comes from the handling of documentation, so there is a significant opportunity to improve this element of the trading process.”
On day one of SIBOS, panellists unanimously agreed that doing nothing to modernise payments was no longer safe bet for transaction banking.
Rising interest rates, excitement around blockchain use cases and cross-border payments were all hot topics at this year's AFP conference in San Deigo.
Today CGI and GTNews have announced the launch of the fifth annual Transaction Banking survey report, which offers which offers critical insight into the corporate-to-bank relationship.
The US dollar and debt yields falling on the North Korea missile test, treasury being a top target for cyber criminals and why treasurers aren't into real-time payments all hit the latest headlines in the world of treasury this week. Don't miss our ten top news stories from around the world.