Tech giant IBM has launched a new blockchain-based technology designed to facilitate more efficient trade financing in the oil supply chain.
The technology was developed by a project pioneered by IBM, in conjunction with investment bank Natixis and commodities consortium Trafigura, in a move that could pave the way for smoother cash flow throughout oil supply chains.
The project has been developed on source code from the Hyperledger project, an open-source consortium developing blockchain technology led by the Linux Foundation.
Developed and hosted on IBM’s BlueMix cloud infrastructure, the solution allows for real-time verification and presentation of transactional data, as well as holding ancillary documentation on delivery, payment and more.
It is hoped that the blockchain will enable parties in the oil supply chain to more seamlessly liaise with partners, smoothing the process to allowing trade finance and capital flows — essential features in ensuring frictionless financing between supply chain partners.
The project is not the first time Natixis has been involved in trade financing projects using blockchain technology. The investment bank is already a member of the R3 development consortium, as well as the Digital Trade Chain, which aims to achieve similar objectives.
Arnaud Stevens, head of commodities at Natixis in New York, said transparency gains and cost savings could see the technology overhauling the currently outdated models for trade financing within the industry.
"We want to use blockchain to optimize the antiquated arena of commodity trade finance. The current process is paper- and labor-intensive, we have multiple friction points with high processing costs and limited automation. Distributed ledger technology brings some much-needed innovation into our industry."
The application has already generated significant interest from companies and governments around the world, not least from authorities in Dubai, who are keen to remain at the forefront of the development of this emerging technology.
Similar projects are also being undertaken by several leading global banks, with sights set on reducing the barriers and manual processes currently present within the trade finance structure.