Blockchain has made many remarkable strides across various fields. In a first of its kind, Indian multinational steel-making company, Tata Steel, along with HSBC, conducted a blockchain-enabled paperless trade transaction.
First “integrated paperless letter of credit and eDocs transaction for a steel export” using Blockchain
The Indian metal giant executed the fist-ever blockchain-powered trade finance deal with a UAE-based business called Universal Tubes and Plastic Industries Ltd. The company reportedly imported its order of flat carbon steel to the UAE from Tata Steel’s base in India.
The complete paperless transaction was carried out over the Contour platform. Notably, HSBC is a founding shareholder of the blockchain platform. The multinational investment bank led the latest transaction between the two companies and went on to validate the operational feasibility of blockchain technology as an alternative to the traditional mode of exchanges that entail paper-based documentation.
While asserting that the Indian exporter using its in-house potential and external ecosystems via careful curation of collaborations to advance innovation, Peeyush Gupta, the vice-president [steel marketing and sales], Tata Steel, was quoted saying,
“Adoption of this platform is in line with our objective of agility and enabling a faceless yet trustworthy all-time interface to better customer experience. This unique initiative, executed in collaboration with HSBC, demonstrates our continued efforts to lead technology-led disruptions by challenging the status quo.”
Sunil Veetil, who happens to be the Regional Head of Global Trade and Receivables Finance [GTRF] at HSBC acknowledged being confident that this example of blockchain technology use will set the for widespread adoption by other clients, counterparties, and industries.
Blockchain’s Impact On Trade Finance
The trade finance sector relies significantly on paper-based processes that are an easy target to security vulnerabilities. These archaic ways of legacy transactions are not efficient and can take as long as 90-120 days in order to process letters of credit, substantiate documents, and institute trust among stakeholders.
Blockchain technology, on the other hand, can digitize end-to-end trade finance affairs with much more security as well as efficiency. It allows more transparency in terms of governance, reduces processing times, reduces capital requirements as well as greatly minimizes and averts risks of fraud, human error, and overall counterparty risk.