UBS Unveils Blockchain for Trade Finance at Sibos
Swiss banking giant UBS has unveiled a project designed to replicate the entire lifecycle of an international trade transaction on Hyperledger's Fabric blockchain.
Built in collaboration with IBM, the trade finance project is still in its earliest stages, but it's arguably already more ambitious than many blockchain prototypes that focus on just a single aspect of the process. Designed to "holistically" combine payment transactions, the prototype merges trade finance transactions, foreign exchange payments and more, into one single, elaborate smart contract.
According to UBS's head of product and market development for transaction banking, Beat Bannwart, the effort also involved the full range of UBS professionals who are subject matter experts in these areas.
Bannwart told CoinDesk:
"We looked at it from a transaction banking point of view, so we involved people from trade, from supply chain finance. But the aim was actually to combine all these different steps into one single solution, where the entire business flow is covered."
In large transactions, letters of credit can be used by a purchaser's bank to mitigate the sense of risk a seller experiences while the product is in transition. But letters of credit can take as long as seven days to process, according to UBS's numbers, during which time additional risks can accumulate.
To give an idea of how complicated the process is, UBS said a letter of credit can weigh 500 grams and comprise 36 documents.
By programming that process into a smart contract on Hyperledger, Bannwart said he expects to be able to cut the processing time down from seven days to one hour.
In addition to the letter of credit process, the work revealed in a video presentation at Sibos on Wednesday is designed to also incorporate the account opening process and more.
"It is complementary," said Bannwart. "It is not replacing any procurement or negotiations parties, it is for the pure execution and monitoring afterwards, so that we save them time and you actually have fun to use it."
Rapid iteration with FinTech startups
The emphasis on fun ran throughout the presentation, which heavily focused on the project's aim to build a user-friendly interface, one that was designed to operate on the go, say for example from a transportation vehicle.
To move that design thinking forward, much of the work was completed during an intensive two-day work session at the financial technology accelerator Level 39 in London, better known for hosting startups than big banks.
During the build, representatives from UBS's IT department joined with staff from the IBM Competency Center to work through the process of moving from visualizations to actually building the product.
IBM's client executive in charge of the UBS integrated account team, Fabio Keller, described the build as a group of "extraordinary people at the same table, locked down in a room for design thinking."
Also around that table were Level 39 startups including cloud-hosted blockchain startup Credits and smart documents startup Clause Match, according to the bank’s senior innovation manager, Alex Batlin.
Though he said there are currently no contractual agreements between the startups and UBS, Batlin added that the firms' participation was part of a larger UBS strategy.
He told CoinDesk:
"We made a very conscious decision, we wanted to make sure that we learn, but also mentor the startups."
Reports of UBS's blockchain work have been percolating online since last year, including news that multiple blockchain "experiments" were underway.
Then, last month the bank emerged as a major player in the space when it was revealed it was part of a five member consortium that was working on a "utility settlement coin" designed to help central banks embrace blockchain functionality.
Going forward, it remains unclear how long it will take to complete the international trade project, according to Batlin, who helped build the team behind the effort, but who will be joining BNY Mellon this fall.
But what is more certain, according to Keller is that what happens next.
UBS plans to take the prototype to customers and end users, he said, with the hope that this will "validate" that the bank is "going in the right direction."
Image via Michael del Castillo for CoinDesk
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