HSBC Exec Warns 'Digital Islands' Could Inhibit Blockchain Trade

When HSBC's Vinay Mendonca thinks about how distributed ledger technology will reshape global trade, he sees two scenarios - one inspiring, the other dispiriting.

Without such standards, trade finance could end up on "Digital islands," or silos disconnected from each other, said Mendonca, the global head of product and propositions for global trade and receivables finance at HSBC. And he believes that would do no one much good.

It's perhaps not surprising HSBC is thinking about interoperability; the bank has a finger in just about every trade platform of note.

HSBC was the first bank to partner with and invest in Tradeshift, the digital trade platform which boasts 1.5 million suppliers in 190 countries.

HSBC has also gone well past the proof-of-concept stage, completing the world's first blockchain-based trade finance transaction with food giant Cargill and R3's Corda platform.

"A fundamental challenge for all of us is to make all this fit together. So, how do we make sure the Cargill solution on Corda has interoperability with the national trade platform in Singapore, as an example?".

Stepping back, the HSBC executive's concern for how to connect various platforms grows out of a realization that trade finance cannot be digitized in isolation.

Mendonca pointed out that HSBC has actually been doing this type of thing for years with the SWIFT for Corporates.

"For instance, you don't have to connect to five different banks; you connect once and you can give an instruction to all those five banks. So stuff that was put in place a while ago for cash is now available for trade."

On the other hand, HSBC would compete with others on the reach of its network to support transactions across the globe, Mendonca said, or the advisory capability of its trade experts and the service levels it offers.