Big banks team up on blockchain tool for European SMEs

Software platform aims to streamline business processes behind trade finance in a way that will give SMEs greater flexibility

Seven major banking brands have joined forces to popularise a blockchain tool designed to simplify trade-finance procedures for European SMEs.

Launched on 16 January, the Digital Trade Chain (DTC) consortium aims to streamline the business processes involved with managing, tracking and securing domestic and international trade transactions.

The consortium points out that large companies tend to use documentary credit as a means of reducing the risks involved in trade-finance transactions. But that facility is not always suitable for SMEs – or firms that prefer open-account solutions.

By maintaining secure records on a digital, distributed ledger, DTC software will speed up the order-to-settlement process and significantly decrease administrative paperwork.

It is also hoped that the platform’s end-to-end transparency will provide SMEs with the confidence to initiate trade with new partners in their home markets, or in other markets of Europe.

DTC was originally developed last year by Belgian bank KBC, in partnership with IT firm Cegeka. Following a brief test run, KBC Group CEO Luc Gijsens explained: “SMEs are having to run their businesses differently in an increasingly digital age.

“[Our] successful DTC trial shows that blockchain technology offers a number of opportunities that we want to continue testing and developing.”

With that in mind, KBC has now recruited six, leading players in the banking industry to take the technology one step further. Those institutions are Deutsche Bank, HSBC, Natixis, Rabobank, Société Générale and UniCredit.

By pooling their expertise and resources, the consortium members will work towards the launch of a scalable version of DTC.

They will initially focus on building critical mass for the tool in seven European markets: Belgium and Luxembourg (KBC), France (Natixis and Société Générale), Germany (Deutsche Bank and UniCredit), Italy (UniCredit), the Netherlands (Rabobank) and the UK (HSBC).

HSBC global head of product Vivek Ramachandran said: “Trade can either be done over a letter of credit, which is complex and expensive and time consuming, or you can trade on open account which has a huge amount of risk, because… one of the counterparties is bearing the risk at any point in time.”

“I believe trade is the perfect use case for distributed ledger technology. You want transparency, verifiability, and immutability of agreements and information.”

Deutsche Bank global head of disruptive technologies and solutions Roberto Mancone said: “For DTC to be successful, it needs to be available and accessible by a large number of SMEs – hence the importance of having a number of banks involved.”

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