HSBC recently revealed that it had enforced its live transaction of blockchain Letter-of-Credit (LC) in Malaysia, successfully. A local news outlet in Malaysia reported the development on Oct. 14.
The transaction constituted the resin import of Malaysia’s Simply Packaging Sdn Bhd from a Singapore based firm. Both firms are among the top performers in their respective industries. HSBC Malaysia had been the issuing body, and HSBC Singapore had been advising or nominated body.
As reported in earlier news, HSBC Holdings reported its profits plunging below the estimates of the analysts, leading to a gloomy forecast for this year, with the giant’s stock taking a downturn. The bank mentioned that the sluggish performance took the road of higher expense, with its stock price taking huge hits. Although, that did not mark the edge of the grim situation for the bankers. The bank earlier also reportedly noticed an economic crisis in the United Kingdom. China is to weigh over the bank’s graph of performance this year.
Given a difficult battle for the bank this year, this blockchain initiative indicates a possible improvement in growth graphs.
This accounts for the 11th blockchain transaction headed by HSBC, and for HSBC Malaysia, this is the first master blockchain transaction. Before this, a soybean shipment was transferred from Argentina to Malaysia, and the contract was subsidized with a digitally performed Letter of Credit, over R3’s Corda blockchain setting.
This reflects a substantial move for Malaysian firms who wish to digitize the trade. It enables simpler and quicker execution of business processes, with a reduced time to transact, giving rise to operational capital efficiency. Blockchain’s trade finance implementation also assists the growth of trade velocity, particularly in cases where there are short shipping routes, for instance, the cross-border business of Malaysia with Singapore.
This Malaysian and Singaporean trade was valued at US$85 billion in the year 2018. A typical transfer of commodities between close nations takes shorter periods comparatively, under 2 days, but the executive paperwork generally prolongs their delivery. This cycle of commerce including validation of the documents takes around 5-10 days. The blockchain exchange packaging took just 24 hours to be completed.
Stuart Milne, Chief Executive Officer, HSBC Malaysia, said, “I am very pleased that HSBC has pioneered Malaysia’s first pilot blockchain LC transaction. This showcases our strong commitment and ability to support cross-border trade by Malaysian businesses using cutting-edge technology platforms.”
With the integration of blockchain technology, the transactions have entirely digitized the executive tasks with the electronic presentation of vital documents of trade through:
- Incorporating Bolero’s electronic bill of lading (eBL) portal to manage and distribute eBL
- Title completion transfer while goods are in transit
- Removed paper reconciliation, enabling instantaneous updates
- Enabling End-to-end transparency for parties
- Timely inventory management, elimination of tolls on demurrage and reduced turnaround times
Hence, huge cut downs in expenses and lowered delivery timeline indicate a possible growth phase for the bank.