Microsoft Corp and Bank of America Merrill Lynch have announced a collaboration on blockchain technology with the objective of transforming trade finance transacting. As part of this collaboration, the two companies will build and test technology, create frameworks, and establish best practices for blockchain-powered exchanges between businesses and their customers and banks. 

The project will use the Microsoft Azure Blockchain as a Service which was first introduced in November 2015. The global scale, hybrid cloud capabilities, extensive compliance certification portfolio, and enterprise-proven security of Azure provide businesses with confidence and choice, especially in highly regulated industries like financial services, health care and government. More than 80 percent of the world’s largest banks are Azure customers. Furthermore, more than 75 percent of the global systemically important financial institutions are using Azure, representing the highest bar for legal, compliance, security and acquisitions teams.

Microsoft Treasury advisors

Microsoft Treasury experts will serve as advisors and initial test clients, establishing the first Microsoft Azure-powered blockchain transaction between a major corporate treasury and financial institution. “By working with Bank of America Merrill Lynch on cloud-based blockchain technology, we aim to increase efficiency and reduce risk in our own treasury operations,” said Amy Hood, executive vice president and chief financial officer at Microsoft. “Businesses across the globe – including Microsoft – are undergoing digital transformation to grow, compete, and be more agile, and we see significant potential for blockchain to drive this transformation.”

Enhancing manual processes

Bank of America Merrill Lynch believe that currently, underlying trade finance processes are highly manual, time-consuming and costly. With blockchain, processes can be digitized and automated, transaction settlement times shortened, and business logic applied to related data, creating a host of potential benefits for businesses and financial institutions including: more predictable working capital, reduced counterparty risk, improved operational efficiency, and enhanced audit transparency, among other benefits.

“The potential benefits of blockchain will help drive meaningful supply chain efficiencies to the clients of both Microsoft and the bank. This project is another example of our continued commitment to introduce financial innovations for the betterment of global commerce,” said Ather Williams, head of Global Transaction Services at Bank of America Merrill Lynch.  

Development and testing of the initial application, built to optimize the standby letter of credit process, is currently in progress. The Microsoft and Bank of America Merrill Lynch teams are demonstratng the technology at SIBOS in Geneva. Following the initial development and testing, the teams will work to refine the technology and evaluate applications to include more complex use cases and additional financial instruments.

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CTMfile take: This is how the use of block chain technology will develop in the financial transaction business: two companies building and testing technology, creating frameworks, and establishing best practices for blockchain-powered exchanges between businesses and their customers and banks. The other key piece here is that Microsoft Azure Blockchain is delivered as a cloud based service. Corporate treasury department’s world-wide will be very grateful if they can make it work.