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Africa in world’s first blockchain bank transaction

September 9th, 2016
A trade finance transaction between the Seychelles and Ireland, via Barclays Africa, could herald a new era in financial technology.
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Africa was at the forefront of a major technology landmark this week as Barclays Africa and its UK parent company Barclays plc completed the world’s first trade finance transaction using blockchain technology.

The trade, between Ireland and the Seychelles, was based on a new technology platform developed by Wave, an innovative start-up company that went through the Barclays Accelerator programme powered by TechStars in New York last year. The bank says it could herald a new era of simpler, faster and safer trade finance.

While companies around the world are looking for ways to improve trade finance transactions using the speed and security offered by blockchain technology, this is the first time it has been achieved in a live trade. Because of the involvement of Barclays Africa, additional pilot projects involving African clients are likely as the technology is developed and adapted.

The pilot trade involved a letter of credit transaction between Seychelles Trading Company Ltd and Ornua (formerly the Irish Dairy Board), clients of Barclays Africa and Barclays UK respectively. It used the Wave technology platform to transfer the electronic Bill of Lading (“eB/L”), with the funds sent via Swift.

The Wave application allows all stakeholders on the supply chain to send, receive and track an eB/L as well as upload and send related documentation. The application is linked to a distributed ledger which securely records and verifies the ownership and authenticity of the documents. This eliminates many of the current inefficiencies in international trade.

The Global Alliance for Trade Facilitation estimates that “7% of the global value of trade is absorbed by the cost of documents alone”,  which means companies around the world stand to save significant costs and time, with the shipping industry and financial institutions expected to be some of the biggest beneficiaries.

George Wilson, Head of Africa Trade Financial Institutions, says that “While trade finance is ripe for innovation, it has been a difficult area to digitise because every unique trade involves numerous parties – importers, exporters and banks at either end, shipping carriers and customs officials – and they all have to be supportive and comfortable with the technology.”

Barclays Africa project manager for the pilot, Kelly Parkhurst, said the successful Seychelles pilot trade would accelerate interest in the Wave technology.

“The Wave application is simple to use, and their team has a long term vision and strategy that sets them apart from other start-ups playing in this field,” she said.

Given the speed of technological advances and the global interest in the Wave product a full commercial rollout of the application might happen sooner than originally anticipated. The key to adoption is in an agile and highly collaborative approach, says Parkhurst.

James Scott, Head of Digital at Corporate and Investment Banking for Barclays Africa, said the successful pilot trade was an example of the technological advances taking place across Africa.

“We have been taking a leading role in helping to develop products and investigate technologies that will bring efficiencies and cost savings to Africa. This includes blockchain, which has the potential to fundamentally change the way certain businesses operate.”

“Barclays Africa was the first African bank to join the R3 Blockchain consortium, which includes some of the world’s biggest financial institutions investigating the uses of blockchain technology. We nominated our Seychelles client for this first pilot and could involve other African trade finance clients, and other banks with clients in Africa, in future tests.”

Temi Ofong, Chief Executive – Corporate and Investment Banking Africa (Excluding South Africa) and Head of Global Finance and Transactional Banking at Barclays Africa, said Africa continually provides examples of new technology leapfrogging over existing and often outdated systems.

“This technology solves a lot of issues for everyone involved in trade finance. It reduces risks such as fraud, it prevents forgeries of documents, and it eliminates a huge amount of paper work. Importantly, it saves a lot of time – typically these documents take anywhere from 2 to 10 working days to be couriered from party to party. Now it can be done electronically in hours or minutes, depending on the back end processing.”

Both Seychelles Trading Company and Ornua were excited about the change the Wave application could bring to the trade industry, CEO of Seychelles Trading Company, Veronique Laport commented that “The allure of Wave is in its simplicity. It’s easy to operate and simply reduce paper based transactions in the international trade. An industry wide roll out of such an application will greatly benefit any Company dealing with imports or exports.”

David O’Rourke, Group Trade Finance Manager at Ornua Co-operative, said:  “Moving to paperless trade would be hugely beneficial in supporting the supply chain, through reduced costs, error free documentation, and fast transfer of original documents to our customers worldwide.”

Gadi Ruschin, CEO at Wave said: “Effective use of blockchain technology really can have a huge impact on the future of trade. By adopting our system, trade can be done more easily and more cheaply while providing a simple and friendly user experience without changing existing workflows.

We thank all participants for joining our live pilot and for taking the first steps towards paperless trade. Barclays has been a tremendous support in getting us to this important milestone and we look forward to engaging in more industry collaborations as the application progresses to the next stage.”

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