The live transaction involved Fox & Lillie, a wool exporter and a client of HSBC Australia, sending a shipment of wool from Australia to China.
The live transaction, completed in late March 2019, involved Fox & Lillie, a wool exporter and a client of HSBC Australia, sending a shipment of wool from Australia to China SDIC International Trade Nanjing Co (SDIC Trade Nanjing), a buyer and a client of HSBC China.
Using Voltron, a blockchain-based trade finance network, HSBC China issued a digitised letter of credit on behalf of SDIC Trade Nanjing. Fox & Lillie then reviewed, verified and uploaded its own trade documents to the platform to complete the transaction.
A letter of credit is used in international trade and is a guarantee of payment from a financial institution to a seller of goods, subject to clearly defined terms and conditions.
“This live deal between Australia and China builds on blockchain transactions that we have executed over the past year in a number of markets around the world, validating the commercial and operational viability of this solution,” said Joseph Arena, Head of Global Trade and Receivables Finance, HSBC Australia.
Around 43,000 letters of credit were issued into and out of Australia last year, underpinning USD42 billion of trade, according to SWIFT. Trade transactions conducted using blockchain technology allow all parties to review the documents in near real-time, which in turn reduces cost, risk and lead times.
Bain & Company estimates that blockchain could increase global trade volumes by $1.1 trillion by 2026, from the current base of $16 trillion.
“Fox & Lillie, as one of Australia’s oldest and largest family owned wool exporters, prides itself on its resilience and longevity in the wool industry, and its readiness to innovate and embrace change has played a large part in our evolution,” said James Lillie, Managing Director, Fox & Lillie.
“This technology was inevitable and we were excited to work with our partners SDIC Trade Nanjing and HSBC to help facilitate this transaction and to take a brief ‘peek’ into the future.”
Digitisation of the letter of credit process will give Australian exporters, such as Fox & Lillie, a competitive edge.
“This live deal shows the evolution of HSBC’s blockchain strategy and we look forward to extending the benefits of this technology to more clients over time,” Mr Arena said.