profit_image - Fotolia

Barclays uses blockchain for trade finance transactions

Barclays Bank has successfully tested the use of blockchain technology to complete a large trade finance agreement, which promises huge efficiencies

Barclays and startup Wave have used blockchain technology to complete a trade finance transaction which is quicker and cheaper than the heavily paper-based method currently used.

Trade finance transactions are large payments, often international, that traditionally require many participants, lots of paper and many couriers.

But Barclays and Wave completed what they described as a “world first” by using blockchain technology to handle the documentation to approve the fund transaction, which was made through the Society for Worldwide Interbank Financial Telecommunication (Swift).

The letter of credit transaction, as it is known, was between Ornua (formerly the Irish Dairy Board) and Seychelles Trading Company.

Using distributed-ledge technology the Wave platform allows all parties involved to see the documents they need and transmit them where required on a decentralised network. This removes some of the inefficiencies of traditional international trade.

“The new system could therefore speed up trade transactions, reduce costs for companies around the world and reduce the risk of documentary fraud,” said Barclays. 

Barclays said there are substantial cost savings to be be made on courier costs and it could also bring down the time taken to complete a trade from days to a few hours. 

Read more about blockchain

  • Blockchain, the distributed ledger technology behind bitcoin, is both a threat and an opportunity for financial services – and banks are taking it very seriously
  • Spreading cyber crime, like the ransomware attacks on NYT and BBC, has Congress considering bitcoin security
  • A panel of financial services experts discussed adoption of blockchain technologies at the Innovate Finance 2016 Summit

Barclays global head of trade and working capital Baihas Baghdadi said one of the biggest headaches in global trade is the movement of the huge amount of paper required to facilitate transactions.

“That is why we’ve been very keen to partner with Wave in using blockchain technology to save time and money for our clients, and potentially transform trade finance for businesses around the world,” he said.

Ornua Co-operative group trade finance manager David O'Rourke added: “Moving to paperless trade would be hugely beneficial in supporting the supply chain, through reduced costs, error-free documentation, and fast transfer of original documents to our customers worldwide.” 

Barclays and Wave will now be working with a select group of trade finance clients to develop the service further. 

Separately, in March 2016 a global banking consortium – which included Barclays, Royal Bank of Scotland and HSBC – completed cloud-based tests of five different blockchain technologies. Working with IT supplier R3, the banks, from all over the world, tested trading using blockchain and cloud technology. The aim of the pilot was to see how distributed ledgers could be used commercially in global financial markets.

IT analyst company Forrester believes full-scale, industrial-strength blockchain deployments “aren’t imminent”, with banks preferring to put blockchain under the microscope in a lab environment for the next 10 years.

Read more on IT for financial services

Data Center
Data Management