A senior executive in one of the two consortia that recently announced progress towards applying blockchain or distributed ledger technology in letter of credit (L/C) transactions is calling for the two development teams to work together.

A consortium of Bank of America Merrill Lynch, HSBC and the Infocomm Development Authority of Singapore said it had successfully developed a prototype using blockchain technologies in L/C transactions, (DC World News, 22 August 2016).

Financial innovation company R3 and over 15 of its consortium member banks said they had successfully completed two prototypes that they say demonstrate how distributed ledger technology can address challenges facing the trade finance industry, (DC World News, 30 August 2016).

Proof of concept

In an apparent race to announce proof of concepts, both consortia are exploring how distributed ledger technology could make writing L/C business quicker, easier, more accurate and less prone to fraud.

But global head of product for HSBC's trade finance business, Vivek Ramachandran, has appealed to developers and banks to collaborate.

Collaboration call

"My view is that we will all have to come together because this has to be industry led, the ecosystem has to adopt it...[t]he whole industry has to come together to build this out," he said in an interview published by International Business Times.

"I think now we need to get the technical teams together to understand the pros and cons, because part of what we have learned is also the technical limitations of distributed ledgers, in terms of the number of nodes you can have or the quantity of data you can have on it. So now may be the time to share those and see how we can put our heads together to take this to next level," he concluded.

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