2018 was a big year for HSBC as a recently published press release has revealed that the financial institution completed $250 billion worth of transactions (from its internal balance sheets for global transactions) last year by utilizing blockchain technology. This feat was accomplished using HSBC blockchain platform dubbed FX Everywhere.
HSBC Blockchain Platform
As one of the largest banks in the world, HSBC has sought out new technologies to help improve its services and enhance transaction processes for its large client base. The intrinsic attributes of the distributed ledger technology (DLT) provide significant advantages for the finance industry. Due to this fact, DLT is quickly becoming one of the fastest-growing and most disruptive fintech innovations. Details from the press release indicates that HSBC has been able to effectively leverage these advantageous blockchain traits which the bank summarizes as having “a shared and single version of the truth.”
Since its launch in February 2018, the HSBC blockchain platform has successfully processed 150,000 payments and has settled over 3 million blockchain-based foreign exchange transactions.
The press release highlights that FX Everywhere was widely used for internal purposes last year as the platform helped “orchestrating payments across HSBC’s internal balance sheets.” FX Everywhere has been able to enhance many of HSBC’s services by providing quicker settlements and implementing faster payment confirmations by eliminating redundant protocols.
Beyond FX Everywhere
In a bid to improve international trade financing, HSBC teamed up with Standard Chartered, PNB Paribas and other banks to sponsor the development of a blockchain platform called “eTrade Connect”. This platform aims to reduce the mandatory time for loan approvals from 36 hours to four hours.
In May 2018, HSBC completed its first blockchain trade finance transaction. It involved using R3 Corda blockchain platform to issue a letter of credit for Cargill, a US-based food and agriculture firm. The transaction was slated to handle the shipment of soybeans from Argentina to Malaysia. This blockchain pilot project helped the transaction partners to cut costs, reduce paperwork, and save time.
HSBC Blockchain Cross Border Settlement
Talking about the benefits that FX Everywhere brings to the table for HSBC, the bank Acting Head of Foreign Exchange and Commodities, Richard Bibbey, mentioned that blockchain integration has helped to streamline the bank processes. HSBC can also “hosts thousands of FX transactions”. But this may only be the tip of the iceberg.
According to him:
“Following prosperous implementation inside the bank, we are now exploring how this technology could help multinational clients – who also have multiple treasury centers and cross-border supply chains – better manage foreign exchange flows within their organizations.”
Delving into the cross border settlement niche could place HSBC in direct competition with established payment networks like Ripple and SWIFT.
FX Everywhere vs. Ripple?
Many experts and blockchain evangelists have applauded HSBC efforts with FX Everywhere. However, some have argued that the bank should have patronized already established blockchain payment settlement technologie like Ripple. Ripple with its RippleNet technology has become one of the most successful crypto startups with with its potential to be widely adopted by enterprises. It has made a name for itself as a frictionless settlement system while receiving widespread adoption from more than 100 banks all over the world.
As it appears, HSBC intends to avoid dealing with cryptocurrency based projects. This could explain why the bank decided to create its own blockchain settlement system instead of relying on a platform like RippleNet. However, whether FX Everywhere will eventually emerge as a strong Ripple competitor is yet to be seen, but one thing remains certain, the deployment of blockchain technology in the finance sector will only continue to grow as players within this space begin to prepare themselves for a new era of speed, immutability, and transparency.
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