ING and Société Générale Corporate & Investment Banking have successfully used blockchain technology to carry out a live oil trade between parties with Mercuria, a global commodity trading group.

The banks presented the blockchain prototype testing results on 22 February coinciding with IP Week in London. The test proved that there were significant speed, cost and risk benefits to be achieved.

Commodity trading and finance sector is still very much based on the exchange of physical paper documents. This leads to high cost, delays, and risks, making it a market with high inefficiencies, ripe for transformation. The application of blockchain technology to the commodity trade financing chain can prevent issues such as documentary fraud and allow for the digitalisation of assets, the release said.

“The commodity finance industry is hampered by nature by inefficiencies and outdated procedures. By applying blockchain technology, we expect that we can eliminate a lot of these, making the overall process faster and more cost effective and the tests we have been able to carry out have proved this”, Patrick Arnaud, managing director Trade & Commodity Finance at ING.

Called Easy Trading Connect, the platform has been designed for paperless trading and aims to digitalise and standardise commodity transactions in order to increase speed and efficiencies in the trade process. According to the official release, it is the first comprehensive platform prototype to be developed which can be expanded and scaled across the commodity and finance domain and uses blockchain technology to overcome some of the industry’s biggest challenges.

“The Easy Trading Connect platform allowed real-time access to information for all parties, eliminating the need for an acknowledgment process. It also keeps a full data record, which is useful for auditing and as well as having an intuitive navigation system and a well thought through design”, Federico Turegano, global head of Natural Resources and Infrastructure at Société Générale Corporate & Investment Banking, added.

The platform also boosts operational efficiency and quality by introducing auto-checking of documents. The prototype was used in a real trade to validate expectations.

The experiment involved an oil cargo shipment containing African crude which was sold three times on its way to China, and included traders, banks as well as an agent and an inspector, all performing their role in the transaction directly on the platform. The results demonstrated that the platform can greatly improve the efficiency of certain processes, bringing the average total time for a bank to complete their role in the transaction down from approximately three hours to 25 minutes.

“We are very pleased with the success of this initial test. The blockchain technology allows for access to real-time data and key details of the transaction all in one ecosystem, creating an improved and more flexible user experience”, Alistair Cross, global head of Operations at Mercuria, stated.