Commonwealth Bank of Australia and Well Fargo are claiming a world-first interbank open account transaction using a blockchain and the Internet of Things for the shipment of goods across international borders.
The transaction involved a shipment of cotton from Texas, USA to Qingdao, China, executed over a private distributed ledger between the seller, the buyer, and their respective banks.
The trade introduced a physical IoT supply chain trigger to the terms of the transaction to confirm the geographic location of goods in transit before a notification is sent to allow for release of payment.
IBM has been using a similar cargo tracking facility aligned with smart contract distribution to improve efficiencies in its own supply chain network.
Michael Eidel, executive general manager of Commonwealth Bank’s Cash-flow and Transaction Services, says existing trade finance processes are ripe for disruption.
"We strive to stay at the forefront of disruptive technologies to understand how they can be used to enable greater efficiencies and solve the real world challenges our customers face," he comments. "The interplay between blockchain, smart contracts and the Internet of Things is a significant development towards revolutionising trade transactions that could deliver considerable benefits throughout the global supply chain.”
Eidel's counterpart at Wells Fargo, Chris Lewis, echoes the comments but adds: "This marks another step in evaluating technology that, over time, could support the evolution of trade finance. While significant regulatory, legal and other concerns remain to be addressed with the technology, we are committed to engaging with our partners to explore potential applications within trade finance.”
This is not Wells fargo's first blockchain pilot with an Australian bank. The US bank has also paired with ANZ on a proof-of-concept shared distributed ledger platform that demonstrates the potential to improve the efficiency and speed of cross-border correspondent banking payment reconciliation and settlement.