Blockchain technology would help the bank reduce letter of credit settlement time, decrease the amount of paperwork, and simplify the trading process.
DBS Bank, the Singapore-based banking multinational, joined the Contour commerce and finance chain to use blockchain technology in the process of digitizing trade agreements.
This trading chain is built on R3’s Corda blockchain platform. Until now, Contour’s main launch could take place later this year.
With this decision, the DBS Bank of Singapore becomes the first bank in that country to join this network. Important institutions such as BNP Paribas, Bangkok Bank, ING, HSBC, Standard Chartered, and Citi Ventures support this chain of commerce. These recognized Singapore companies are part of the Contour foundation.
This blockchain solution would help the bank to reduce the time of settlement of letters of credit, decrease the amount of paperwork, and simplify the process of negotiation or trading. In this way, DBS hopes to digitize its letter of credit settlement process completely through the blockchain solutions that the platform offers.
Blockchain Technology Benefits
Another benefit Contour will offer is that it will help DBS Bank’s corporate clients to conduct negotiations between applicants and beneficiaries, in real-time, before the digital broadcast. The financial institution expects this tool to increase the accuracy of the letter of credit issuance.
Real-time tracking and audit trails of transactions that blockchain technology can implement will make the process more transparent. Blockchain technology would also help deny or resolve discrepancies and save time.
In this way, John Laurens, Head of DBS Bank’s global transaction services group, recently spoke about the benefits that Contour could bring to the commerce and finance ecosystem.
“It is about transforming the way industries work, providing greater transparency, security, and speed to build sustainable commercial ecosystems that are capable of withstanding the spikes and downturns of economic cycles and that are resistant in times of crisis”, he said.
Overcome Physical Limitations
Contour has been preparing since last year. In 2019, the chain of commerce conducted a successful test on its platform. During this test, according to local media, Contour recorded USD 30 million in a letter of credit transactions.
Ajay Sharma, HSBC regional head of global trade and receivable financing, previously stated that: “Leveraging blockchain technology for trade finance has overcome the physical constraints we are having today”. One of these physical limitations is the Covid-19 pandemic, which makes it difficult for the normal operation of some offices.
In the traditional trade finance system, most processes today require human intervention and lots of paperwork. This new system could allow finishing, more quickly, manual processes.
Due to the current Covid-19 crisis, the financial institution believes that it is now more crucial than ever to prepare to achieve a more contact-free form of the trade process, avoiding any risk of contagion from contact diseases.
The project of the DBS Bank is another example of how important institutions are adopting blockchain technology to improve their daily processes to implement transparency and efficiency in all the stages.
By María Rodríguez