CBA, Wells Fargo test blockchain in trade finance

Commonwealth Bank, US financial services company Wells Fargo and NSW-based Brighann Cotton have undertaken a world-first interbank transaction involving combining blockchain, smart contract and IoT technologies.

The transaction involved a shipment of cotton from Texas to Qingdao China. An open account transaction was conducted via a private distributed ledger between the seller, Brighann Cotton's US division, and the buyer, Brighann Cotton Marketing Australia.

Using the combination of emerging technologies, the parties established a physical supply chain trigger so that payment was only authorised once the geographic location of the goods was confirmed.

Commonwealth Bank said this provided all parties involved in the transaction with greater certainty compared to traditional trade instruments such as letters of credit, which focus on documents and data rather than real-time information. Buyers can also track a shipment in real time.

“The combination of these emerging technologies could eliminate many inefficiencies currently experienced in international trade,” Brighann Marketing said.

“The benefits of lower costs and improvements to security through reduction of errors, risk and time enable a company to achieve greater efficiency and have more predictable working capital.”

Combining blockchain, IoT and smart contracts provides greater transparency, cost efficiency, customisability, convenience and security compared to traditional processes, according to Commonwealth Bank GM for Cash-flow & Transaction Services Michael Eidel.

“Existing trade finance processes are ripe for disruption and this proof of concept demonstrates how companies around the world could benefit from these emerging technologies,” he said.

Image courtesy of ARIZMONTEROJAZ under CC