Aiming to ensure hassle-free, real-time and more cost-effective payments, Standard Chartered Bank, Bangladesh has made the country's first-ever blockchain transaction.
The transaction was made by issuing a letter of credit (LC) for Viyellatex Ltd over the Contour blockchain network.
The leading ready-made garments exporter Viyellatex imported textile items from Viyellatex Spinning by issuing this LC.
Standard Chartered acted as the issuing bank for the applicant, as well as the advising bank for the beneficiary of the LC.
The entire transaction was in real-time, paperless and completed digitally through Contour's network.
Built on R3's Corda blockchain, Contour improves data transparency, removes administration costs and reduces friction in global trade; all of this leading to an overall increase in efficiency and reduction in costs for all parties.
As one of its founding members, Standard Chartered benefitted from Contour's network which simplifies the LC process, delivering shorter settlement times, instant discrepancy resolution and simplified sanctions screening.
KM Rezaul Hasanat, chairman and chief executive officer of Viyellatex Group, told The Business Standard, "We recognise that innovation and digitisation are the keys to remaining competitive in today's ever-changing global trade scenario. At Viyellatex Group, we always strive to provide quality products and services on time."
"Blockchain technology will certainly increase trading efficiency and reduce the turnaround time of the LC process. It is a real-time payment and the easiest of processes; like mobile financial services," he added.
Hasanat said, "Initially, this payment was done among two entities of our group. Hopefully, we will deal with such payments among other customers of Viyellatex, as we have more local clients who procure yarn from our spinning mill."
Viyellatex spinning mill has supplied yarn worth $100 million to about 50 local textile mills, he added.
Hasanat said, "We are very happy and proud to be collaborating with Standard Chartered Bank and to be a part of the first trade transaction in Bangladesh using revolutionary blockchain technology. The talks started with the bank last month and it became possible last week."
Blockchain payment services will cost less than those of traditional payments of LC which require 0.5 percent to one percent be paid as a charge, he added.
Initially, it is free of cost but the bank might impose some cost in future, said the Viyellatex chairman.
"We are extremely proud to have introduced blockchain technology in Bangladesh for trade transactions," said Naser Ezaz Bijoy, chief executive officer of Standard Chartered Bank, Bangladesh.
"We are very excited to be offering our clients improved speed and reduced risks of settlement offered by platforms such as Contour," he added.
"Global trade lacks a solution that drives out inefficiencies, improves data transparency and enables interoperability between all trade participants. The long-established elements of trade finance do not have sufficient integration, ultimately causing friction and unnecessary administration," said Carl Wegner, CEO at Contour network.
"These inevitably cause significant barriers for global trade growth, adding complexity, increasing cost and delaying the process for both banks and corporates," he added.
The Contour network can overcome these issues, providing a consistent and reliable infrastructure for global trade to flourish – especially in countries like Bangladesh that count on LCs for a significant part of their trade volumes, said its CEO.
"The recent transaction with Viyellatex Ltd serves to prove that a solution is out there and readily available for adoption. It is also hugely positive to have Standard Chartered introduce this revolutionary technology for trade in Bangladesh and we are proud to be a part of the first transaction in the country," he added.
The ready-made garments industry is the main export sector of Bangladesh. Most raw materials of this industry are sourced locally through inland letters of credit. These inland LCs involve a lot of tedious paperwork.
If these transactions can be moved onto paperless blockchain, major efficiencies can be achieved in local trade across this industry. There is huge scope to scale up transactions over blockchain if all parties of the RMG supply chain can be added onto this network.
Standard Chartered is the largest international bank in Bangladesh, with a presence of more than 115 years in the country. The blockchain transaction is the latest among many other "firsts" that the bank has introduced, including ATM and credit cards.
Standard Chartered was the first bank to issue a letter of credit from Bangladesh and has retained its position as one of the top trade banks in the country.