eCommerceePaymentMarketing

European Banks Choose IBM Blockchain For Trade Finance System

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Blockchain growth in banking sector continues after seven major European banks sign deal with IBM

Seven major European banks have said they will built a Digital Trade Chain platform on IBM Blockchain, which will be powered by Hyperledger Fabric v1.0.0.

The banks involved with the IBM Blockchain project include Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit.

The Digital Trade Chain platform that IBM will work on has been designed to modernise cross-border trade finance to small and medium businesses in Europe. It should help lower costs and simplify the trade financing processes via digitisation, process automation and blockchain technology, the banks said.

Bank finance © Paul Fleet Shutterstock 2012

SME Trading System

Blockchain of course is a digital technology for recording and verifying transactions. Until recently, it has mostly associated as a global online ledger that underpins the bitcoin digital currency.

Its transaction transparency makes it well suited for financial systems. Indeed, the NASDAQ stock exchange in the US is already evaluating blockchain in order to see if it could be used in trading of shares in private companies.

IBM has already predicted that most banks will adopt blockchain, and Big Blue was apparently selected after a “global competitive bidding process.”

The Digital Trade Chain solution will run in the IBM Cloud. Essentially, it is designed to connect the parties involved in a trade transaction, both online and via mobile devices. The thinking is that it will simplify trade finance processes for small and medium businesses.

“To make the Digital Trade Chain network a reality and enable it to serve potentially thousands of the consortium’s banking clients, we turned to IBM in enterprise blockchain to help us quickly bring this highly scalable system into production,” said Rudi Peeters, CIO, KBC on behalf of the Consortium.

“Their blockchain and banking industry expertise will help us create a new platform for small and medium businesses in Europe that can enable them for faster, easier and cheaper trade transactions.”

Financing for small and medium enterprises (SME) is apparently an underserved market segment, and it is hoped the new solution will open up “new revenue streams and initiate new trading relationships and foster trade growth.”

World Bank research was cited, identifying the fact that 50 percent of SMEs do not have access to formal credit.

“In working with hundreds of clients around the world on a diverse range of blockchain projects, trade finance has emerged as one of the strongest use cases for the technology,” said Marie Wieck, general manager, IBM Blockchain. “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.”

The Digital Trade Chain is expected to go into production by end of 2017.

Blockchain Growth

IBM is making big strides with Blockchain. Earlier this month, IBM partnered with American insurance group AIG to build a ‘smart’ insurance policy that utilises blockchain digital ledger technology.

Last month Big Blue announced an ‘accelerator program’ to help businesses seeking to utilise the fledgling technology.

In March IBM also launched a cloud-based enterprise-ready Blockchain service to enable firms to build applications on top of the Linux Foundation’s Hyperledger Fabric code set within the IBM Cloud.

Quiz: What do you know about Bitcoin?