The President of Santander Bank, Ana Botín, said that the transaction was completed through we.trade. The smart contract will be executed automatically through the banking system.
Technology is increasingly allowing the application in business of smart contracts, which are reaching all the corners of the world. In the banking sector, international commercial transactions are being officially conducted on a blockchain platform. Such is the case of Banco Santander, which has just announced its first operation on a blockchain through a smart contract.
In fact, after testing a development for more than a year, financial institutions have made live exchanges possible through smart contracts. To that end, they are conducting transactions through the we.trade platform for financing open account trade.
In this context, Ana Botín, President of Banco Santander reported on July 31st that the banking entity completed the first “BPU blockchain-based” transaction, through the financial resource we.trade and a smart contract between a customer of said Bank and another of Nordea Bank in Sweden.
Through her Twitter social network account, she said that she was pleased to “have completed” that transaction. In detail, she said that the BPU is similar to a letter of credit (LoC), but financing and payment are automated through a “smart contract.”
Botín referred to a tweet posted in July 2018 in which she indicated that, to address the problem of trust and financing when making a transaction, LoC are usually used.
On that occasion, she said that in Europe distances are so short that products can arrive before LoC are processed. Consequently, 80% of the exchanges are done based on trust.
Botín considers that we.trade’s solution is that it uses smart contracts that are automatically executed through the banking system when certain conditions are met. Besides, participants know that their banks have identified everyone in the network, as well as the location of the assets.
He highlighted that Santander, as a provider of banking services for small and medium enterprises (SMEs), is part of the we.trade consortium. In fact, it began more than a year ago in a pilot project to serve customers in Spain, but this operation with Norde, implies that it expanded its implementation.
What does we.trade do?
According to some news media, we.trade is a resource to manage, track and protect open account business transactions between SMEs in Europe, which was developed based on the Hyperledger Fabric environment and built by IBM.
This platform seeks to provide transparency about the status of transactions and shipments, which it digitizes along with the rest of the process, from the creation of the order to the execution of the payment.
SMEs use we.trade through their banks and can also take advantage of the platform to access financial services.
Among the financial products available through the platform, there is precisely the bank payment undertaking (BPU), where the buyer’s bank provides the seller with an irrevocable commitment to pay the invoice on the due date. There is also financing, where the seller’s bank provides support by discounting said LoC.
For its part, the Spanish bank was working on the development of a blockchain-based application for more than three years when Santander UK announced its intention to become the first bank to exploit Ripple technology to conduct international transactions. In 2015, Santander InnoVentures had invested US $4 million in Ripple.
By Willmen Blanco