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Major banks from India and Dubai complete blockchain trade finance and remittance transactions

India’s largest private bank, ICICI, and one of the middle east’s largest banks, Emirates NBD, recently announced successful international blockchain transactions for both Trade Finance and Remittance purposes.

India’s largest private bank, ICICI, and one of the middle east’s largest banks, Emirates NBD, recently announced successful international blockchain transactions for both Trade Finance and Remittance purposes.

International Trade Finance allows importers and exporters to minimize their trade risk through financial networks and trusted intermediaries. A single transaction can involve lending, issuing letters of credit, factoring, export credit issuance, and insurance, just for a single shipment.

The process typically takes two to three days, involves a lengthy paper trail, and requires international shipping and a courier for document delivery. The costs for using these intermediaries has always been a major pain point for the import/export industry, and blockchain technology may hold the key to removing that cost almost completely.

The World Economic Forum and Deloitte recently published a 130-page paper, “The Future of Financial Infrastructure,” detailing how blockchain technology can reshape financial services. Trade Finance appeared throughout the report as one of the most promising sectors of finance for improvement.

World Trade Organization logo“Since financing has become such an integral part of trading, the market has grown substantially to more than US$ 10 trillion annually.”
— – World Trade Organization

The test data concerned a scrap steel transaction between a Mumbai-based firm and a Dubai-based supplier. The information contained in the blockchain transaction included a purchase order, an invoice, shipping and insurance papers.

Each participant was able to authenticate ownership of goods, transmit their trade documents, check the status of their applications, and transfer their titles, while maintaining confidentiality.

The trade application “replicates the paper-intensive international trade finance process as an electronic decentralised ledger,” according to Emirates NBD. It gives all participants, such as banks and exporters, the ability to access a single dataset on an “un-alterable ledger,” in real time. Doing so makes secure and encrypted digital contracts easy for stakeholders, the bank said. The application is designed to work with existing banking systems and processes, allowing banks to “plug in their systems and process.”

ICICI Bank logo“I envision that the emerging technology of blockchain will play a significant role in banking in the coming years by making complex bilateral and multi-lateral banking transactions seamless, quick and more secure.”
— – Chanda Kochhar, ICICI MD & CEO

The international bank-to-bank remittance testing involved a Mumbai-based ICICI Bank branch sending funds to a Dubai-based Emirates NBD bank branch instantly. Previously, this process took between two hours and a few days.

ICICI Bank Ltd., NYSE:IBN is India’s largest private bank reports total assets of US$139.14 billion as of June 30. The bank’s network currently spans 17 countries with a network of 4,451 Branches and 14,073 ATMs across India.

Emirates NBD is one of the largest banking groups in the middle east, and listed on the Dubai Financial Market. As of 31 December, the Bank’s total assets were US$110 billion. With operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Singapore, and the United Kingdom, it has over 220 branches and over 940 ATMs and employs over 9,000 people from 70 different countries.

Emirates NBD is the digital banking solutions provider for the Dubai Future Foundation and a member of the Global Blockchain Council. On September 18, the Foundation began a three-month program for startups and businesses called the Dubai Futures Accelerator,  which has three blockchain-based businesses attending to help make Dubai a world leader in the technology.

Reflecting on the first successful pilot project, Sheikh Ahmed bin Saeed Al Maktoum, Chairman of Emirates NBD said “Our pilot project, a first for the banking sector in the UAE, demonstrates blockchain’s immense potential to change how organisations and governments conduct business.”

Emirates NBD logo“We anticipate blockchain to be a potential game changer in creating a secure, scalable, cost and time-efficient digital ecosystem for government and businesses and as a bank that has pioneered digital innovation in banking and payments in the UAE, we are truly excited to take the lead in testing future applications of this exciting technology in the banking sector.”
— – Sheikh Ahmed bin Saeed Al Maktoum, Chairman of Emirates NBD

According to Emirates NBD, the technology is called “EdgeVerve Blockchain Framework,” which is a “permissioned ledger designed specifically for the banking sector that can scale up to experiment several business use cases.” The technology was supplied in part by EdgeVerve systems, an I.T. solutions provider that is wholly owned by Infosys. The co-creator was not revealed. EdgeVerve is a newcomer to the Blockchain space and does not list any blockchain products, services, nor experience on their website.

Two likely contenders to be their partner on this project are Blockapps and Consensys, two of three Blockchain startups chosen for the Dubai Futures Accelerator. They’re now at the stage in the accelerator program where they must test out and refine their proposals with the Dubai government contacts. Both already offer “Blockchain as a Service” applications through Microsoft’s Azure cloud platform.

However, the project faces stiff competition. On September 6 Barclay’s Africa in the Seychelles and Barclay’s UK in Ireland claims to have conducted the world’s first transaction over a Blockchain in the Trade Finance space.

The transaction is reported to have guaranteed an export of about US$100,000 worth of butter and cheese to the Seychelles Trading Company from the Irish agricultural co-op Ornua, both clients of Barclay’s. Blockchain start-up Wave, provided the technology for Barclay’s, who had just sponsored Wave through their own accelerator program.

Both Wave and Barclays have made statements since the event that they are planning to follow up from the successful test with some kind of service offering in the future.

Meanwhile Bank of America, HSBC, Merrill Lynch, and Singapore’s IDA announced that they are working on their own consortium network specifically for Trade Finance as well.

Remittances have also been tested by banks across various blockchains, including the February 2016 test by JP Morgan that moved US dollars between 2,200 of their clients across their own test blockchain.


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