A consortium of seven of Europe’s largest banks has chosen IBM to build a blockchain-based trade finance platform for small to medium sized enterprises (SMEs). The platform, which will run on IBM’s Hyperledger Fabric technology, is intended to boost domestic and cross-border trade.
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The Digital Trade Chain (DTC) consortium includes Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit. It chose IBM via a global bidding process. The banks signed a memorandum of understanding in Brussels to develop and commercialize DTC in January 2017.
SMEs Face ‘Financing Gap’ in Trade
IBM’s announcement today noted that SMEs often face a “financing gap” and area a “traditionally underserved market segment”. The World Bank has said 50 percent of the world’s SMEs do not have access to formal credit.
Marie Wieck, general manager IBM Blockchain, said:
“Trade finance has emerged as one of the strongest use cases for (blockchain) technology. By addressing the SME market, which faces challenges in data sharing and access to capital, the Digital Trade Chain Consortium is pioneering a unique blockchain solution with the potential for widespread impact.”
Larger banks use “documentary credit” to reduce trade risks. These include risks associated with managing, tracking and securing domestic and international trade transactions. However such methods are not always suitable for SMEs.
It hopes the blockchain solution will help open new revenue streams for these businesses, and grow trade by making it easier to form trading relationships. And as a blockchain, the usual claims of extra transparency and accountability also apply.
The consortium also hopes the DTC can speed up the order-to-settlement process, reducing paperwork.
IBM Building Blockchain Services on Hyperledger
The Digital Trade Chain network is expected to go live by the end of 2017. It will be hosted on the IBM Cloud and run on Hyperledger Fabric 1.0.0, which IBM itself created. Fabric is one of the five primary projects on Hyperledger, which is administered by the Linux Foundation.
In recent weeks, IBM has also announced a pilot for blockchain-based insurance with AIG and Standard Chartered Bank. The smart contract system, also based on Hyperledger Fabric, hope to ease real-time information sharing between businesses in different regulatory environments.
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Images via IBM, Pixabay