Commonwealth Bank of Australia Wells Fargo and Brighann Cotton claim to have undertaken the first global trade transaction between two banks using the blockchain.
Commonwealth Bank of Australia, Wells Fargo and Brighann Cotton have undertaken the first global trade transaction between two independent banks combining the emerging disruptive technologies of blockchain, smart contracts and Internet of Things.
The transaction involved a shipment of cotton from Texas, USA to Qingdao, China, using the efficiencies of a distributed ledger – Skuchain’s Brackets system – for all parties.
The trade involved an open account transaction, mirroring a Letter of Credit, executed through a collaborative workflow on a private distributed ledger between the seller (Brighann Cotton, US); the buyer (Brighann Cotton Marketing Australia); and their respective banks (Wells Fargo and Commonwealth Bank).
Blockchain- A Job Killer?
The use of blockchain technology creates transparency between buyer and seller, a higher level of security and the ability to track a shipment in real time. The advancement from paper ledgers and manual processes to electronic trackers on a distributed ledger reduces errors and accomplishes in minutes what used to take days.
Existing trade finance processes are ripe for disruption and this proof of concept demonstrates how companies and banks around the world could benefit from these emerging technologies.
The traditional mechanism of a letter of credit can involve as many as 12 steps most of which involve numerous bank staff to handle and check the documents and even more steps if there are discrepancies in any part of the chain of documentation.
The new process will by-pass the multiple manual steps, an attractive option for banks under pressure to cut costs.
