Seven large banks are collaborating on a blockchain-based trade finance and supply chain platform aimed at small- and medium-enterprises (SMEs) that find letters of credit (L/Cs) unsuitable for their business needs.

The so-called Digital Trade Chain (DTC) aims to make domestic and cross-border commerce easier for European SMEs.

Proof-of concept

Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit have signed a memorandum of understanding in Brussels to build DTC, which is based on a supply chain proof-of-concept originated by KBC.

DTC aims to seamlessly connect all parties in a trade transaction (buyer, buyer's bank, seller, seller's bank and transporter), online and via mobile devices, according to a statement.

Simplified processes

This new product claims to simplify trade finance processes for SMEs by addressing the challenge of managing, tracking and securing domestic and international trade transactions.

While L/Cs would perhaps remain a preferred option for larger companies according to the developers, they reckon this product would be a suitable alternative for some smaller businesses because it accelerates the order-to-settlement process and decreases administrative paperwork significantly.

The platform's end-to-end transparency is also intended to give SMEs confidence to initiate trade with new partners in their home market or in other European markets, according to the statement.

Other consortia

Some of the DTC consortium members, including HSBC are involved in other blockchain consortia - such as R3 and IBM/Hyperledger - that are looking at L/Cs utilising blockchain or distributed ledger technology.

HSBC's last blockchain proof-of-concept was L/C focused.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.