Microsoft and Bank of America Merrill Lynch (BofAML) have joined forces to create blockchain-based trade finance apps.
US banking leader Bank of America Merrill Lynch (BofAML) and software giant Microsoft have joined forces on a project to make trade finance transactions faster and cheaper using blockchain technology.
As part of the collaboration, the two companies will build and test technology, create frameworks, and establish best practice for blockchain-powered exchanges between businesses, customers and banks.
“The potential benefits of blockchain will help drive meaningful supply chain efficiencies to the clients of both Microsoft and the bank,” said Ather Williams, head of Global Transaction Services at Bank of America Merrill Lynch.
“This project is another example of our continued commitment to introduce financial innovations for the betterment of global commerce.”
Blockchain has potential to reduce time and cost of fintech processes
As part of the collaboration, Microsoft Treasury experts will serve as advisors and initial test clients, establishing the first Microsoft Azure-powered blockchain transaction between a major corporate treasury and a financial institution.
Currently, underlying trade finance processes are highly manual, time-consuming and costly.
With blockchain, processes can be digitised and automated, transaction settlement times shortened, and business logic applied to related data. This will create a host of potential benefits for businesses and financial institutions, including more predictable working capital, reduced counterparty risk, improved operational efficiency, and enhanced audit transparency, among other benefits.
“By working with Bank of America Merrill Lynch on cloud-based blockchain technology, we aim to increase efficiency and reduce risk in our own treasury operations,” said Amy Hood, executive vice president and chief financial officer at Microsoft.
“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.”
Microsoft introduced its Azure Blockchain as a Service platform in November 2015.
More than 80pc of the world’s largest banks are Azure users and 75pc of global systematically-important financial institutions are using Azure.
The first BofAML/Microsoft app – aimed at optimising the letter of credit process – is currently being developed and tested at Sibos in Geneva, Switzerland.
Following this, the joint team will work to refine the technology and evaluate new applications.