IBM’s Blockchain Technology Gains Big Names in Banking
Blockchain technology may have started as a critical component of cryptocurrency, but it’s proven to be an incubator of innovation in other areas, as well. Case in point: Commerzbank AG, Bank of Montreal, Erste Group Bank AG and CaixaBank SA are joining IBM and UBS Group AG to test the technology as an automated ledger for trade finance transactions, Reuters reports.
Indeed, trade finance may be the ideal application for the secure ledger technology, according to Marie Wieck, general manager for IBM Blockchain.
“Trade finance is a perfect use case because there are so many participants in a trade ecosystem, especially when you talk of global trade,” Wieck told Reuters. “Digitizing and creating a level of trust is a perfect accelerator [for business].”
Leveraging Blockchain for Trade Finance
Trade finance relies on numerous transactions from multiple parties. Because transporters, buyers and sellers must each keep their own independent records of each transaction, they rely on a very manual, error-prone process. As errors pile up, shipments are delayed and money is lost.
Introducing blockchain technology allows all parties to access a trusted, shared record. Better yet, the platform — called Batavia — would enable embedded programs to automatically enforce the terms of a trade agreement. These smart contracts and blockchain ledgers provide a secure, automated and accurate platform for the trade finance industry.
While these banks are just now hopping on board, the Batavia project was initially announced back in 2016. With its new partners, IBM hopes to pilot a test phase with each new bank in the first quarter of 2018, Reuters reports.
The pilot will allow participating banks to track shipments from the moment they leave port until they arrive at their destination. Considering this process has traditionally been manual and paper-based, IBM’s platform could pave the way for blockchain use in other industries that are still using manual transaction processes.
For those unaware, blockchain is a technology devised for digital economic transactions. It works as an incorruptible ledger for these transactions by distributing itself across millions of publicly accessible computers.
Without a single, central database, blockchain relies on unalterable blocks of transactions synchronized in identical ledgers around the world. When one block of transactions is verified and added to the distributed ledger, it becomes a permanent record, viewable to all parties involved.
As IBM’s platform continues to gain steam, the trade finance industry could find itself in a golden era of productivity without the need for manual, error-prone transactions.