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R3 and 39 firms trial new blockchain-based KYC utility
From Global Trade Review (GTR) | By Sanne Wass
R3 has trialled a global, blockchain-powered know your customer (KYC) utility together with 39 banks, firms and regulators.
The four-day collaborative trial, which took place in May, saw the completion of more than 300 transactions on an application designed and built by Synechron on R3’s Corda blockchain platform.
It enabled participants, which included the likes of BNP Paribas, Deutsche Bank, ING and Société Générale, to communicate and manage test customer KYC data across the network. The solution works as a “self-sovereign” model, allowing corporate customers to create and control their own identities, including relevant documentation. Banks can request access to the data, whilst customers can approve requests and revoke access. Any updates that are made become automatically visible to banks with permission to access the data.
R3 says in a statement that the trial reduced duplication and costs by eliminating the need for each institution to individually attest to and update KYC records.
A utility like this could be a game-changer for the trade finance industry, where the cost and complexity of compliance with regulation, including KYC requirements, remain a big barrier to the availability of finance. A shared utility could help ease mundane compliance processes that are often duplicated across financial institutions.
While KYC utilities have already being explored by other firms, to date most have had limited success due to low uptake.
But R3 and Synechron believe that the use of blockchain technology will make their solution more appealing to the industry.
“We’ve had increasing demand from our network for blockchain-based KYC solutions as they recognise that blockchain can address many of the challenges facing existing utilities,” Jane Kenyon, project lead at R3, tells GTR.
Tim Coates, US blockchain lead at Synechron, emphasises the fact that the application is decentralised and gives parties control of their own data as key differentiators from existing utilities.
He adds: “Blockchain’s immutability used as a new verification mechanism, and its peer-to-peer nature enabling greater data privacy are two of the native features that have attracted many in the KYC sector to blockchain.”
While Kenyon could not give details on a specific future timeline, she did say that R3 is working with a number of partners to develop applications on CorDapps to facilitate KYC on Corda, adding: “We are open to working with members who want to take these solutions forward in their institutions.”
The banks and corporates involved in the project include: ABN Amro, ALD Automotive, Alfa Bank, Bank ABC, Bank of Cyprus, BCI, BNP Paribas, China Merchants Bank, Commercial International Bank, CTBC Holding, Deutsche Bank, DNB, Hana Bank, ING, KB Kookmin Bank, Banca Mediolanum, Natixis, National Bank of Egypt, NH Nonghyup Bank, Qiwi, Raiffeisen Bank International, RCI Bank and Services, SBI Bank, Shinhan Bank, Société Générale, US Bank and Woori Bank.
In addition, a number of regulators and central banks took part, including Banco de la República (Colombia’s central bank), Federal Reserve of Boston, Superintendencia Financiera de Colombia and Superintendencia de Banca Seguros y AFP de Peru.
According to Kenyon, a planned feature of the fully developed KYC application would include an observer node that would be assigned to the regulators, giving them visibility on the entire network.
The post R3 and 39 firms trial new blockchain-based KYC utility appeared first on Global Trade Review (GTR).
HSBC and ING complete live trade finance transaction on blockchain
From Global Trade Review (GTR) | By Finbarr Bermingham
HSBC and ING have conducted their first live, commercial trade finance transaction on blockchain, for agrifood trading giant Cargill.
The deal was completed using the R3 Corda platform, with a cargo of soybeans exported from Argentina to Malaysia.
Cargill was the exporter and importer on a deal that saw Cargill Geneva selling soybeans on behalf of Cargill Argentina, and Cargill Singapore buying the goods on behalf of Cargill Malaysia.
It was done using the letter of credit (LC) module of Corda, which has been developed by 12 banks. This enabled the transaction time to be reduced from a standard five to 10 days, to 24 hours. The LC was issued by HSBC, with ING acting as the advising bank. The value of the transaction has not been disclosed.
While the LC was executed on blockchain, other elements of the transaction cycle – such as the bill of lading – were not.
Vivek Ramachandran, HSBC’s global head of innovation and growth for commercial banking, tells GTR that we can expect to see another few live transactions on this platform, as the bank learns how it interacts with the systems of other banks and corporations. However, the primary focus now will be on driving industry-wide adoption.
“We’ve still got a few more steps to do before we get to widespread adoption,” Ramachandran says. “A lot of people have been wanting to make sure that it works with a live transaction. That’s part of the reason this is exciting, to be able to demonstrate that a live commercial transaction with a flagship global trader and two global banks on each side of the transaction, actually works.”
While this is arguably the most advanced trade finance development on blockchain to date, the industry has a couple of years-long history of trialling the technology, with the hype at times reaching deafening levels.
In late-2016, Commonwealth Bank of Australia and Wells Fargo closed a US$35,000 transaction for two subsidiaries of Brighann Cotton, taking 88 bales of cotton from Texas in the US to Qingdao in China, using Skuchain’s Brackets blockchain-based solution.
Since then there have been a plethora of pilots, trials and proofs of concepts, but general frustration in the industry that nobody is bringing blockchain technology to operational trade finance. There have been signs over recent months, however, that this is getting closer.
Batavia, a blockchain-based trade finance platform developed by IBM and a consortium of five banks, completed its first live transactions with corporate clients in April and is thought to be close to commercial use.
we.trade, a European platform for managing, tracking and protecting trade transactions between SMEs, backed by nine banks, is aiming to launch to business clients in the third quarter of 2018.
In India last month, meanwhile, a government-backed invoice financing platform went live with a blockchain-based solution that allowed the various companies involved to share information to prevent double financing via blockchain. However, there is no financing element to this product.
The news comes two months after HSBC’s senior innovation manager, Joshua Kroeker, told GTR that the bank was ready to do live trade finance transactions on blockchain.
The bank had been involved in one of the earlier blockchain projects for trade finance when it worked with Bank of America Merrill Lynch and the Infocomm Development Authority of Singapore (IDA) on a proof of concept to mirror letters of credit using distributed ledger technology.
However, its work on the Corda platform has apparently accelerated beyond its other blockchain developments.
Corda is a platform owned by R3, a US company founded by David Rutter, with members including more than 200 banks, financial institutions, regulators, trade associations, professional services firms and technology companies.
In April, an application for syndicated loans called Fusion LenderComm became the first to go live on the Corda platform. The app had been piloted by banks including BNP Paribas, BNY Mellon, HSBC, ING, Natixis and State Street. It had been developed since early-2017 by fintech company Finastra and R3.
ING has also been heavily involved in the trade-based developments on blockchain technology. As well as being among the banks working with Fusion LenderComm, it was reported to be working with trading house Mercuria and French bank Société Générale to build a blockchain solution for oil trading, early in 2017.
The bank’s managing director for innovation in wholesale banking, Ivar Wiersman, says: “It’s exciting to see this transaction has been completed successfully with clear client benefits in speed and ease in execution.”
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