HSBC said today, May 14, that it had performed the world’s first trade finance deal using one blockchain system instead of multiple platforms. This is a remarkable step on the way to better the efficiency of blockchain technology in international trade.

HSBC completed the deal last week with Dutch bank ING for Cargill. It included a shipment of soybeans from Argentina to Malaysia via Cargill’s subsidiaries in Geneva and Singapore.

Blockchain technology has the potential to reduce fraudulence in LoC (letters of credit) and other transactions. It can as well shorten the number of steps in financial procedures, making things simpler and faster for the banking industry.

LoCs are a widely used financial process between importers and exporters, ensuring transactions worth over $2 trillion. However, the procedure includes a long paper trail and takes five to ten days to exchange documentation.

Referring to a study by the United Nations, HSBC said that using blockchain and transforming all trade-related paperwork into the electronic format can cut the time by up to 44% and expenses by up to 31% in exporting goods.

The reason why letters of credit have persisted is because of two real challenges, the absence of digital infrastructure and the challenge of coordinating multiple parties. This platform helps us overcome the first and I think the technology and everyone focussed on it gives us the impetus to go after the second now with hopefully much better results than we have seen in the past. – Vivek Ramachandran, global head of innovation and growth at HSBC’s commercial banking unit

The Cargill transaction was executed on the platform named Corda. It was developed by R3, a blockchain consortium based in New York. The members include over 100 banks, trade associations, and regulators.

Corda is supported by 12 banks, and it seems an effective backup to expand the technology broadly in the global market. According to Ramachandran, HSBC has another client lined up for another similar transaction.