Seven major European banks including Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit constituted the Digital Trade Chain Consortium to streamline the trade process between small and medium-sized enterprises.
The new blockchain-based trade finance platform will be hosted on IBM Cloud and deployed thanks to the Linux Foundation’s Hyperledger Fabric blockchain. Hyperledger Fabric is a blockchain framework implementation intended as a foundation for developing applications or solutions with a modular architecture. Fabric leverages container technology to host smart contracts called “chaincode” that comprise the application logic of the system.
Trade finance is the practice of financing both trades among different parties. A trade usually involves mainly two parties which can be a seller of goods or services, a buyer and, at least, one third party typically a bank or a financial institution. The intermediary role is to reduce risks for the counterparties which take part in the exchange. Current trade finance processes imply a lot of paper work which is couriered between corresponding banks over the course of a single transaction. Blockchain technology can bring the benefits of automation to the trade finance process. It is already possible to create a replacement for traditional trade finance documents, which can be stored on the blockchain as smart contracts.
Digital Trade Chain aims specifically at improving this process and enhancing the way small companies access to credit. The solution, which is under development, should be implemented by the end of 2017.
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