Hong Kong pushes forward with blockchain project for trade finance
The Hong Kong Monetary Authority and several major banks are on board with the initiative that is hoped will accelerate the document validation and trade finance process by using blockchain technology. The network is envisaged to eventually feed into the Global Shipping Business Network that was formed as an alternative to Maersk and IBM's TradeLens solution
The network’s member banks will be able to leverage trusted data to streamline their trade finance approval operations, improve risk management, and enhance their abilities to extend credit to small and medium enterprises
HONG KONG-based CargoSmart has announced the successful completion of a proof-of-concept for a multi-bank blockchain consortium in Hong Kong facilitated by the Hong Kong Monetary Authority, with the project aiming to prove that linking supply chain data with trade finance transactions can provide enhanced transparency, traceability, and efficiency for member banks and their trade finance customers.
The proposed solution intends to accelerate the document validation and trade finance process by using blockchain technology to circumvent traditional barriers. The eTradeConnect concept explored ways to improve global trade through enhanced collaboration among shippers, banks, terminal operators and ocean carriers, with applications to be further developed once the Global Shipping Business Network is formed.
The GSBN initially comprised carriers CMA CGM, Cosco Shipping, Evergreen, OOCL and Yang Ming, along with ports such as DP World, Hutchison Ports, PSA International and Shanghai International Port Group. It was formed a year ago to provide an alternative to Maersk and IBM’s TradeLens blockchain solution.
The project connected two blockchain networks to bridge the current gaps in trade financing. When granted access to its customers’ relevant historical records provided by ocean carriers and terminals, banks in the eTradeConnect network would be able to shorten the customer validation process, with a better understanding of customers’ backgrounds and with real-time, credible shipment event data.
The proof-of-concept involved shipment management technology solution provider CargoSmart and eTradeConnect, and was facilitated by PwC, with banks and ocean carriers including Bank of China (Hong Kong) Limited, The Bank of East Asia Limited, HSBC, Standard Chartered Bank (Hong Kong) Limited, Cosco Shipping Lines, and OOCL respectively.
The network’s member banks will be able to leverage trusted data to streamline their trade finance approval operations, improve risk management, and enhance their abilities to extend credit to small and medium enterprises.
OOCL co-chief executive officer Andy Tung noted the challenges involved in document and information exchange in shipping and applauded the steps made by the network.
“The success in this proof-of-concept is a very positive direction forward to not only tackle this challenge head on, but to take it a step further by broadening the scope of stakeholders such as financial institutions to be a part of this open and transparent digital ecosystem,” he said.
“We certainly look forward to seeing more of these kinds of forward thinking technologies and collaborations being implemented for the collective good of all stakeholders,” Mr Tung concluded.
“The exchange of trusted and immutable data enabled by blockchain gives rise to a seamless and secured linkage across the global trade and financial sectors,” said CargoSmart chief commercial officer Lionel Louie.
“The proof-of-concept with eTradeConnect has demonstrated the power of trusted networks. CargoSmart will continue to bridge the shipping industry with other sectors for supply chain excellence to create value for all stakeholders,” he added.
It is envisaged that eTradeConnect will dovetail into the GSBN, once it secures all regulatory approvals, as it ultimately operates a data exchange platform for supply chain participants around the world and is seen as an important step towards unlocking the value of digitalization in trade finance.
Hutchison Ports group managing director Eric Ip said: “The successful completion of a proof-of-concept with eTradeConnect marks a positive beginning of a collaboration between carriers, terminals and banks to explore new products and value propositions for trade finance.”
He added: “Once GSBN is established, we are confident future members will benefit from its strong data governance and trusted transactions will help simplify trade for end customers.”
Bank of China (Hong Kong) general manager of Transaction Banking Department Teng Linhui said: “We are pleased to co-operate with CargoSmart and banking peers to foster the development of trade finance infrastructure in Hong Kong.”
Noting that seamless logistics is a key element of the trade process, she added: “We believe that linking eTradeConnect with a shipping network not only helps verify trade transactions and reduce financing risk, but also improves customer satisfaction by streamlining the process.”
Pointing out that the transformation of the trade ecosystem is an essential part of developing the burgeoning digital economy, PwC China consulting leader James Chang concluded: “We are excited to be part of this cross-industry collaboration, which is an example that demonstrates our commitment to innovation, technology and creating value by facilitating industry collaboration.”