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Contour, owned by eight prominent stakeholders including HSBC and ING Standard Chartered, has been able to deliver a global network for trade finance over the distributed ledger. This move will allow the necessary users to transact and also take a look at the information in a much more secure manner. The Blockchain trade finance initiative Contour intends to bring a decentralized, digital trade finance platform into full live production.
Contour is a Singapore-based blockchain trade finance platform and its major shareholders are Bangkok Bank, BNP Paribas, CTBC, HSBC, ING, Standard Chartered, SEB, and Citi, one of the world’s largest commercial banks. Contour provides a blockchain-based network to ensure secure processing and viewing of information. It started in 2017 with a prototype trade finance application called Voltron and was inclined more on letters of credit. Before starting its market life yesterday, it went through severe and extensive testing in 17 countries. According to the pilot implementations made on the platform, it was indeed able to decrease the average processing time for letters of credit to 14 hours.
CEO Carl Wegner believes that the project was implemented at the right time. According to him, the pandemic and the eventual curfews revealed the need to find more effective methods in the field of trade finance. More on the process he said:
“Every time we did a transaction, we carried out a review, and we have been taking on all those inputs and learning from them.”
Banks and other corporations have been using Contour’s LC but one area that still needs work is its legal framework. This has become more important since it is technologically possible to execute transactions with negotiable instruments through the blockchain technology. In many provinces, such mandates are approved only when on paper and signed which only hinders the overall digitization process.
Vinay Mendonca, the global head of product, propositions, and structuring at HSBC said,
“The rulebook is really important. Rather than having to string together four or five different legal agreements between the buyer, seller, buyer’s banks, and seller’s banks, which was very onerous, we now have a rulebook which makes it very easy for everybody to sign up and know what their roles and responsibilities are.”