BNP Paribas and HSBC Singapore have successfully completed Singapore’s first fully digitised end-to-end letter of credit transaction between two different companies – a move that will take the digitisation of trade finance a step closer to becoming a commercial reality.
The transaction involved Rio Tinto selling a bulk shipment of iron ore originating from Australia to China for its customer Cargill.
As part of the transaction, BNP Paribas issued a Letter of Credit (LC) over the blockchain on behalf of Cargill to HSBC Singapore acting on behalf of Rio Tinto.
Both BNP Paribas and HSBC enabled a seamless end-to-end transfer of electronic Bill of Lading (eBL) over traded goods using a digital LC for the first time in Singapore, by integrating the Voltron trade finance solution (through R3’s Corda blockchain platform in the back-end) with Bolero’s eBL system.
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The LC issuance was completed in less than two hours compared with 1-2 days for traditional, paper-based LCs.
More counterparties were engaged in this transaction, compared to previous blockchain transactions with full digital integration, indicating that there is increased interest across the industry to digitise cross border transactions.
The faster documentation turnaround for each shipment can potentially lead to increased flexibility in liquidity management resulting in working capital optimisation.
Digital transactions ensure trade flows are faster, simpler and more efficient.
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