Bank of America and Microsoft have announced their intent to build and test blockchain applications for trade finance.

As part of the deal, Bank of America will work directly with Microsoft Treasury (a group responsible for managing transactions related to its corporate treasury activity and strategic business investments and acquisitions), to establish a blockchain system that can facilitate transactions between the companies.

In statements, Microsoft executive vice president and CFO Amy Hood indicated that the move is driven also by its desire to reduce treasury risk.

Hood said:

“Businesses across the globe – including Microsoft – are undergoing digital transformation to grow, compete, and be more agile, and we see significant potential for blockchain to drive this transformation.”

The companies indicated that they are currently testing how the platform could facilitate the letter of credit process, and that a demo of the technology will be unveiled at the Sibos banking conference in Geneva this week.

The announcements comes amid a larger drive among major financial institutions to use the blockchain to better facilitate trade finance and supply chain processes, with a recent major test taking place at banking consortium R3.

As such interactions require multiple parties, many of whom still use spreadsheet and paper-based processes, the use case has long been seen as a fertile area for applications of the emerging technology.

For more on how blockchain is expected to upend supply chains and trade finance, read our more recent report here.

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