HONG KONG, Aug 10 (Reuters) - HSBC andBank of America Merrill Lynch said on Wednesday they hadcreated the world's first application using blockchaintechnology to simplify one of the most cumbersome aspects oftrade finance.
The banks joined with Infocomm Development Authority ofSingapore to emulate a letter of credit transaction. Letters ofcredit are one of the most widely used ways to reduce riskbetween importers and exporters, helping guarantee more than $2trillion worth of transactions, but the process creates a largepaper trail and is time consuming.
By putting the transaction on a distributed ledger, theimporter and its bank, together with the exporter and its ownbank, can see the data in real time.
Financial services companies around the world have beenfocusing on developing blockchain technology, with advocatessaying it has the potential to save billions of dollars in costsand speed up transaction times. The technology, which underpinsthe digital currency bitcoin, creates a shareddatabase in which participants can trace every transaction.
Discussions are underway with other banks, corporate clientsand shipping companies to further develop the technology, whichis in its early stages, said Vivek Ramachandran, global head ofproduct for HSBC's trade finance business. (Reporting by Elzio Barreto; Editing by Alexander Smith)