The Infocomm Development Authority of Singapore, DBS Bank and the Standard Chartered Bank have successfully completed a proof of concept (PoC) delivering the world’s first application of Blockchain technology designed to enhance the overall security of trade finance invoicing. Leveraging distributed ledger technology, the initiative will reduce risk around duplicate invoice financing for banks while preserving client confidentiality.
Gautam Jain, Global Head, Digitisation and Client Access, Transaction Banking, Standard Chartered, said:“THIS SUCCESS LAYS THE FOUNDATION FOR HARNESSING TECHNOLOGY TO ACHIEVE GREATER GOALS IN THE BANKING INDUSTRY. AS THE WORLD’S LEADING TRADE FINANCE BANK, WE CONTINUE TO INNOVATE AND DEVELOP SOLUTIONS TO SOLVE REAL WORLD ISSUES AND MORE IMPORTANTLY CONTRIBUTE TO THE OVERALL DIGITISATION OF TRADE AND TRADE FINANCE. WE WILL CONTINUE TO LOOK AT WAYS TO COLLABORATE AND CONTRIBUTE TO THE OVERALL GROWTH OF THE INDUSTRY.”
The PoC marks an important milestone in the digitisation journey of trade finance and the revival of global trade. With enhanced security brought into the overall process, it reduces the systemic capital risks arising from duplicate invoices between lenders in a market. This creates a more conducive trading environment which in turn should encourage more trading activities using invoice financing.
Lum Yin Fong, Global Head, Client Management and Implementation, Global Transaction Services, DBS Bank, said:
“DBS IS COMMITTED TO INNOVATING AND SHAPING THE FUTURE OF BANKING TO MAKE BANKING EASIER AND MORE SEAMLESS FOR OUR CUSTOMERS. THIS CUTS ACROSS OUR DIFFERENT BUSINESSES AND THIS PROOF OF CONCEPT IS ANOTHER IMPORTANT MILESTONE FOR THE FRANCHISE. TRADE FINANCE IS TRADITIONALLY A PAPER-INTENSIVE PROCESS BUT WITH THE USE OF DISTRIBUTED LEDGER TECHNOLOGY, WE CAN NOW DIGITISE AND AUTHENTICATE RECORDS. THIS COULD REVOLUTIONISE AND TRANSFORM TRADE OPERATIONS, ENHANCING RISK MITIGATION AND CREATING MORE EFFICIENT PROCESSES FOR BOTH CORPORATES AND BANKS.”
The initiative allows banks to convert invoices into digital assets on a distributed ledger. This gives the participants the ability to access a single source of information for the status of invoices seeking financing across all the participating banks while preserving client and commercial confidentiality. This is done by utilising distributed ledger technology as a means to prevent duplicate financing of the same invoice by different banks. Further, the initiative is envisaged to be an open ecosystem where neutral third parties can participate and verify the authenticity of the related trade documents being financed; further reducing the risk of financing duplicate invoices.
Khoong Hock Yun, Assistant Chief Executive, Development Group, IDA, said:
“AS WE BUILD SINGAPORE INTO A SMART NATION, WE ARE ALSO WORKING CLOSELY WITH THE FINANCIAL SECTOR TO ENABLE INNOVATIONS THAT CAN HELP INCREASE SINGAPORE’S COMPETITIVENESS AS A GLOBAL TRADING HUB. IT IS ESSENTIAL FOR STRONG PUBLIC-PRIVATE SECTOR PARTNERSHIPS TO FLOURISH TO CREATE A SMART FINANCIAL CENTRE WITH WORLD CLASS LEADING EDGE SOLUTIONS THAT BENEFIT OUR BUSINESSES.”
Jacqueline Loh, Deputy Managing Director, Development and International, FinTech and Innovation Group, MAS, said:
“GIVEN SINGAPORE’S ROLE AS A LEADING GLOBAL TRADE FINANCE AND FINTECH CENTRE, BANKS BASED HERE ARE WELL POSITIONED TO TWIN THESE TWO STRENGTHS TO IMPROVE EFFICIENCY AND STRENGTHEN RISK MANAGEMENT. THIS POC DEMONSTRATES THE INNOVATIVE SPIRIT OF SINGAPORE’S SMART FINANCIAL CENTRE TO LEVERAGE DISTRIBUTED LEDGER TECHNOLOGY TO SUPPORT ECONOMIC TRADE – WHICH IS THE LIFEBLOOD OF ASIA’S ECONOMY.”
In the next phase of the project, the working team will be looking at widening the participation to include other industry stakeholders, including government agencies such as Singapore Customs and other banks based in Singapore, to join as partners and contribute to the commercial adoption of this initiative.