Microsoft, Bank of America Announce Blockchain Collaboration
Seeking to create an efficient trade finance platform, Microsoft and Bank of America Merrill Lynch will launch a pilot program using Azure.Microsoft and Bank of America Merrill Lynch are collaborating on a new pilot project aimed at automating trade finance transactions using blockchain technology, the companies announced yesterday. Blockchain is best known as the distributed database technology at the heart of cryptocurrencies like Bitcoin. It is hardened against tampering, preventing even its operators from revising or otherwise meddling with its continuously growing list of records. In Bitcoin's case, it serves as its public ledger of transactions. Fintech (financial technology) companies and other security-conscious enterprises are keeping a close eye on the technology, hoping blockchain will usher in an era of automated, efficient and fraud-free recordkeeping and transaction systems. Microsoft and Bank of America plan to see how blockchain can help modernize and automate trade finance transactions using Microsoft's Azure blockchain-as-a-service suite. Typically, the trade finance process involves a lot of manual work, requiring banks and other institutions to gather and verify the necessary information and guarantees involved in extending financing deals between buyers and sellers or importers and exporters.
The firms announced on Sept. 27 that they are developing and testing an application targeting the standby letter of credit, a guarantee issued by banks during the trade finance process, using blockchain on Azure. Ultimately, Microsoft and Bank of America hope to automate financial processes, shorten settlement times and reduce counterparty risks, among other efficiency- and security-enhancing perks, the companies said.