European banking giants ING and Société Générale (SocGen) have successfully completed a live oil trade in cooperation with global commodity trading House Mercuria using blockchain technology announced February 22.

The three trading houses have developed a blockchain prototype for paperless trading in the oil trade and finance sector aimed at reducing costs and inefficiencies. The new trading platform is called Easy Trading Connect and “is on the verge of digitalizing an age-old sector” according to ING.

In the commodity trade and finance sector, the use of paper documents for processing transactions is still very much commonplace. Paper-based practices in commerce, however, cause delays and increase the risks of human errors such as typos and lost documents, which makes it an area ripe for disruption by new technologies. Given the manner in which blockchain technology can securely record and transfer data and make it viewable for all parties with access keys, it is not surprising that ING, SocGen, and Mercuria opted to for the distributed ledger technology to build their new trading platform.

“The commodity finance industry is hampered by nature by inefficiencies and outdated procedures.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,” said Patrick Arnaud, Managing Director of Trade Commodity Finance at ING.

The prototype transaction involved a shipment of African crude oil, which was sold three times during its journey to China and involved banks, traders, an agent, and an inspector who transacted digitally on the new platform to process the oil trade from start to finish. Using Easy Trading Connect, the average total time banks were involved in the trade was reduced from three hours to 25 minutes, while for traders efficiency increased by 33 percent.

“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,” said Federico Turegano, Global Head of Natural Resources Infrastructure at SocGen. The platform also auto-checks all documents to prevent fraud or errors.

Alistair Cross, Global Head of Operations at Mercuria, considers the test a success and stated: “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.”

As the prototype transaction was successful, we can expect more blockchain-based trading in the commodity trade and finance sector in the future.

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