Blockchain Testing Underway for Global Trade Transaction
Commonwealth Bank of Australia, Wells Fargo and Brighann Cotton have undertaken a mission to complete a global trade transaction between two independent banks, combining blockchain technology, smart contracts and Internet of Things. The transaction involved a shipment of cotton from Texas, USA to Qingdao, China, using a distributed ledger – Skuchain’s Brackets system – to track and manage the cargo for all parties.
Cameron Austin, General Manager of Brighann Marketing Inc, said: “The combination of these emerging technologies could eliminate many inefficiencies currently experienced in international trade. 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.”
The trade mirrored a Letter of Credit between Brighann Cotton, US and Brighann Cotton Marketing Australia and their respective banks, Wells Fargo and Commonwealth Bank. The trade allows the tracking of the geographic location of the goods whilst in transit, before a notification is sent to allow for release of payment. This provides all parties with greater certainty compared with traditional open account and trade instruments like Letters of Credit, which focus on documents and data by reducing errors and speeding up the processes involved considerably.
Executive General Manager of Commonwealth Bank’s Cash-flow and Transaction Services, Michael Eidel remarked: “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. The interplay between blockchain, smart contracts and the Internet of Things is a significant development towards revolutionising trade transactions that could deliver considerable benefits throughout the global supply chain.”
Following the successful completion of this transaction, Commonwealth Bank and Wells Fargo will continue actively collaborating with trade finance clients, financial institutions, fintech companies and consortiums like R3, as well players in the insurance and shipping industries, to ensure their clients benefit from the changes in technology across the global trade ecosystem.
Chris Lewis, Head of International Trade Services for Wells Fargo, explained: “Wells Fargo is committed to exploring emergent technologies and innovative concepts that benefit our customers. In this case, we demonstrated how a new approach to trade could benefit a joint Wells Fargo and Commonwealth Bank customer, Brighann Cotton. This marks another step in evaluating technology that, over time, could support the evolution of trade finance. While significant regulatory, legal and other concerns remain to be addressed with the technology, we are committed to engaging with our partners to explore potential applications within trade finance.”