Consortia ’21: ‘DLT offers new solutions to solve long-standing problems’

In advance to BCR’s Consortia ‘21 event, which will take place on 19-20 October in London, Vinay Mendonca (pictured), Managing Director, Global Head Product, Propositions & Structuring Trade and Receivables Finance at HSBC BANK PLC talks to TRF News about investing in DLT/blockchain technology and its impact on the financial services industry, third party blockchain platforms challenges in selecting and connecting them with house systems. 

TRF News:  What are the reasons for a bank to decide to invest in blockchain technology?

Vinay Mendonca: Like other technologies, distributed ledger technology can offer new solutions to solve long-standing problems in better and more effective ways. DLT brings:

  • Decentralisation: A way to collaborate within an ecosystem across different industries while keeping the control over one’s data and clients’ data
  • Trust: A secured and resilient way of transacting
  • Paperless: A way to digitalise assets without relying on any central counterparty or physical documents and in future transfer titles, and trigger smart-contract actions for true STP
  • Most importantly for us, it enables the digitalisation of paper process which will make trade:

  • Faster – on average it takes between five and ten days to process the paperwork related to a trade transaction. Increasing the velocity of trade allows clients to trade more or get paid earlier.
  • Cheaper – today’s paper-based systems create unnecessary costs, friction and delays.
  • Safer – having a single source of truth enables larger and faster financing and better protection against fraud.
  • More sustainable – being able to make trade finance more accessible across all stages of a supply chain requires increased visibility, thereby improves the resilience of a supply chain.
  •  TRF News: What should be taken into consideration when choosing between third party blockchain platforms?

    Vinay Mendonca: The first thing to take into consideration is client benefits. The platform should bring tangible benefits to our clients compared to traditional processes – it must solve a clear problem statement – e.g. improving velocity of trade. Then, as a regulated financial institution, it is critical that any platform adheres to our security and compliance requirements. Last, but not least, scalability is important - the ability to handle scale and speed of transactions in an ESG compliant manner.

    TRF news: What are the main challenges when connecting blockchain platforms with a organisation's own systems?

    Vinay Mendonca: Talking about challenges, data taxonomy is one of them: data and process should enable integration without additional workload or costs. For trade, there is a lack of standardization makes this more challenging and something the ICC/DSI are looking to address

    Another challenge is interoperability: we can connect easily through APIs however, being able to connect various platforms in a fully synchronized way is still an area under development.

    Plug&Play is as well very challenging. To solve this, we need ERP vendors, core-banking providers, trade finance systems, shipping systems, port systems, etc. to be able to plug into such DLT platforms at relatively lower costs and reducing the onboarding friction is key to delivering scale.

    TRF News: Where do you see blockchain having the biggest impact in banking?

    Vinay Mendonca: Blockchain brings tangible benefits for use cases where there are multiple parties who need to exchange information while being in control of their data. Trade and trade finance is therefore a perfect use case. We are also seeing impact of blockchain with other banking products and services such as in the FX, payments or securities world. The advent of Central Bank Digital Currencies will inevitably provide the perfect glue between those blockchain powered products and services.

    Meet Vinay Mendonca during BCR’s Consortia ‘21 London 19-20 October, where he will speak on the panel session “Developing the business case for technology and platform investments”.