HSBC Plans Pilot Programs on Blockchain-Based Payment Services

The multinational banking giant HSBC is set to test Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term technology in live transactions, reported the Global Trade Review (GTR).

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The bank has been involved in moulding and testing the nascent technology for the past two years, and this week its senior innovation manager Joshua Kroeker unveiled the latest project during a private media call.

The bank will launch several pilot projects based on a proof-of-concept consensus mechanism. It worked on these previously with other banking giants like Bank of America Merrill Lynch and the Infocomm Development Authority of Singapore to mirror the issued letter of credit.

Mr. Kroeker told the GTR: “Going from that PoC in 2016, we’re at the tipping point of getting our customers involved in live transactions in the coming weeks and months. The technology has come a long way, we’re much more comfortable with its security and Scalability Scalability Scalability is a term that describes the constraints of a network via hash rates to meet increased demand. In the context of Bitcoin, scalability reflects the issue in which a limited rate can process transactions adequately.Blocks within the Bitcoin blockchain are limited in both size and frequency. The overall transaction processing capacity of the network is dictated by the average block creation time of 10 minutes as well as a block size limit of 1 megabyte. Consequently, this leads to pain Scalability is a term that describes the constraints of a network via hash rates to meet increased demand. In the context of Bitcoin, scalability reflects the issue in which a limited rate can process transactions adequately.Blocks within the Bitcoin blockchain are limited in both size and frequency. The overall transaction processing capacity of the network is dictated by the average block creation time of 10 minutes as well as a block size limit of 1 megabyte. Consequently, this leads to pain Read this Term.”

“That’s the stage we’re at now, we want to get the customers involved to do those [pilots]. The next stage after that, in getting it live into production, is a further amount of work around the application but more work on the network,” he added.

HSBC is a part of the R3 consortium and will test the upcoming programs using R3’s Corda.

Mr. Kroeker added: “I’ve spent a large amount of time over the past two years speaking to lots of our largest trading clients. For the most part, they have worked very hard to streamline and digitise their operations where possible, but the product that gives them the most trouble is the documentary credit. This product is one of the first we’re going to pilot, which is going to be exciting.”

However, the bank cannot launch the blockchain-based services unless its other banking partners join the same network. For commercially using the blockchain-based letter of credit services every party involved in the trade cycle - the involved banks, regulators, and customs - need be on the same network.

“We see that developing throughout the year so that in 2019, around the same time, we should be in a position to have both the network of banks, corporates and others, and the app ready to use on a wider scale,” he said.

HSBC is focused on dominating the ASEAN region, which is projected to be one of the world’s growth hubs for digital services over the coming years.

Ajay Sharma, HSBC’s regional head of global trade and receivables finance, said: “The OECD reports that the documentary costs and administrative procedures of lending can increase costs by up to 23%. Inefficient border processes add 5% to the cost. In ASEAN, they are removing barriers, simplifying and automating custom procedures, there are lots of things being done.”