This relates to a pilot transaction in September 2016; a letter of credit which guaranteed the export of €110k worth of dairy products from Ireland to the Seychelles using distributed ledger/ blockchain technology.

Distributed ledger technology pilot in UK, Ireland and the Seychelles is one to watch

The challenge

Trade finance, and some documentary trade products in particular, involve a large number of labour and documentation intensive steps which result in lengthy processes, high costs and incremental risks for the parties involved in such trade transactions.

These inefficiencies are well known within the industry and there have been numerous attempts to encourage wider adoption of dematerialised/electronic documents in trade finance, with limited success so far.

The solution

Barclays partnered with Wave, one of 11 companies that went through the Barclays Accelerator programme (New York 2015). The company aims to reduce the costs associated with supply chain management through the use and transfer of title of an electronic bill of lading and ancillary documents by digitally transferring it across the network using DLT/blockchain technology.

Blockchain is a decentralised, distributed, peer-to-peer network allowing all parties in the trade transaction to have much better visibility over an asset and enables an electronic transfer of ownership. The technology enables the records of disparate parties to be synchronised and an asset to be transferred from one party to another while reducing the number of steps in the transaction, alongside other benefits.

Best practice and innovation

Barclays is at the forefront of promoting blockchain across the industry through involving other banks in supporting adoption of Wave’s system, with the hope that this can develop into an industry-wide improvement in how trade documentation is managed.

The bank is also part of a working group created by the International Chamber of Commerce (ICC) to examine the application of dematerialised documents in trade and supply chain finance at both a National Committee and ICC Paris level. The Wave pilot with Ornua Co-operative Ltd has clearly demonstrated the benefits of the technology in documentary trade.

O’Rourke also comments: “Our bank is also involved in extensive collaborative work with the R3 consortium, looking at digital asset transfer, smart letters of credit and interoperability across multiple blockchains in the trade space. We are delighted to have been involved in this pilot project.”