Trade finance refers to both domestic and international payments relating to insurance, lending, issuing letters of credit, export credit, and factoring. A whopping 80 to 90 percent of world trade depends on trade finance. One of the main issues with trade finance is the large volume of paper documents which make up for much of the information flow. Banks nowadays are opting to carry out trade finance through digital data flows thereby reducing costs and increasing efficiency by replacing the flow of paper with blockchain-based platforms so as to store and access information in a secure and transparent environment.
Global enterprise software firm R3 has collaborated with SBI Holdings, its largest shareholder, to expand the implementation of the Corda blockchain in Japan and the East Asian region.
Profile of R3
R3, founded in 2014 and headquartered in New York, is a distributed ledger technology company. It leads a consortium comprising of more than 200 firms and provides the required assistance in the research and development of distributed ledger usage. It is geared towards helping companies in the domains of finance, insurance, healthcare, energy, and governments. R3 works with central banks, trade associations, clearing houses, market infrastructure providers, and exchanges to help in managing and executing financial agreements. R3 is an enterprise blockchain firm which develops blockchains for businesses.
Profile of SBI Holdings
SBI Holdings is a financial company operating in three business segments namely the financial services, asset management, and biotechnology-related segments. It is engaged in financial service businesses online and has set-up investment activities in Japan and other international destinations. It also operates in the housing and real estate businesses which include the operation of online intermediate services and developing and trading investment property.
R3 and SBI Holdings partner to launch a new venture which will help boost the adoption of Corda in Japan.
In the words of David E. Rutter, CEO of R3, “SBI is one of Corda’s biggest champions. With this partnership, we are able to come better together to support the growth of the Corda platform in the region. Through the combination of SBI’s incredible influence, built up over decades of excellent service to their clients, and the rich ecosystem which we have fostered around Corda, we have a compelling and unique offer for firms in the region. We are building a network of the best institutions, technologists, and services to ensure that Corda is the default choice for enterprise blockchain. This partnership is a crucial step on that journey.”
So, what is Corda?
Corda is an open-source blockchain project designed for businesses. It can be used to build interoperable blockchain networks which help carry out transactions in a private and secure environment. It allows businesses to transact directly with each other through their smart contract technology. It allows businesses to maintain a shared ledger of transactions thus removing the need for involved parties to check their transactions after interacting with each other.
This partnership will focus on increasing the commercial adoption of Corda. This will enable SBI to leverage its network of regional contacts to accelerate the adoption of Corda among corporates and financial institutions. By connecting into Corda’s ecosystem, they will have access to all the partners of R3.
Yoshitaka Kitao, CEO of SBI Group stated “SBI has been participating in a consortium led by R3 from the earliest stage when they established the Lab and Research Center to try out blockchain technology. Large investment and commitment by SBI were decided when R3 formulated its vision for Corda when we have come to notice its possibilities of having a significant influence on the future financial infrastructures. Since then, the development of Corda has progressed smoothly and is now in the commercialization stage. In order to spread this innovative technology, it is essential to provide proper support. SBI strongly commits in the support for the establishment of framework/partnership for the well-development of R3’s Corda in Japan and East Asian Region.”
Sumitomo Mitsui Banking Corporation (SMBC)
Japan’s third-largest bank based on assets, Sumitomo Mitsui Banking Corporation (SMBC), plans to launch its trade finance services on a blockchain platform. Yasuyuki Kawasaki, SMBC’s vice chairman announced at a recent Fintech seminar in Tokyo, about rolling out new services for both import and export companies using the trade finance blockchain platform called Marco Polo. Through the blockchain platform, it aims to improve its trade operations. The Marco Polo network is built using the Corda platform of R3. The Marco Polo network was founded by R3 along with Trade XI, the trade finance specialist.
Trade finance is looked at as a beneficial use case for blockchain. Blockchain certainly has the ability to streamline the trade finance process. Using blockchain for trade finance helps speed up the transaction settlement timeframes.
With all the information being presented in a single digital document due to blockchain technology, it allows for instant and easy operation and is immediately available for viewing for all members at the same time. It also helps unlock capital which would otherwise be tied up waiting to be transferred to all the parties involved in the transaction. Several companies have now become aware of blockchain and have started investing in it and developing test programmes to use blockchain in the trade finance domain.