In a move that could revolutionize trade financing, ICICI Bank said that it has settled an export transaction in minutes as against the usual three days using a custom-made blockchain network with Middle Eastern counterpart, Emirates NBD. This was the first blockchain-based trade payment in India and the bank is now talking to others to grow the network. ICICI has joined the ranks of a few global institutions that are pioneers in this field. ICICI Bank has used this new technology for transferring money as well as trade documents relating to purchase order, invoice, shipping & insurance, electronically in real time. The bank has co-created the network with EdgeVerve Systems, an Infosys arm.
“We believe that trade application is one the useful, relevant and strong application for blockchain. The entire technology makes it much more frictionless and efficient and it is tamper-proof,” said Chanda Kochhar, md & ceo, ICICI Bank. She said that by building the pipe with Emirates NDB and completing a pilot transaction the bank has demonstrated its capability. It will now speak to other institutions and clients to grow the network.
Unlike regular trade transactions where documents are authorized and physically transferred, in a blockchain transaction all parties can view the authorization live — a bit like viewing a shared google document. A key feature is that the records cannot be tampered and any changes can be introduced by creating a fresh entry.
Besides eliminating the need for moving paper across countries, the pilot transaction eliminates the need for financial messaging between banks and introduces the convenience of instant cross-border remittances for retail customers. Currently, international remittances take a few hours to up to two days. It is also envisaged to reduce the cost of remittance for customers as well as banks.
The pilot transaction was executed to showcase confirmation of import of shredded steel melting scrap by a Mumbai-based export-import firm from a Dubai-based supplier. The second initiative involved a transaction on the blockchain application that enabled an ICICI Bank branch in Mumbai to remit funds to an Emirates NBD branch in Dubai in real time. It could do so as the blockchain technology is equipped to send real time financial message to the recipient bank allowing the remittance transaction to take place instantly.
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