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Foreign exchange transactions are becoming faster and more efficient through the implementation of blockchain technology, resulting in lower operating costs. HSBC executive Mark Williamson stated that the new blockchain platform, HSBC FX Everywhere, has saved as much as 25% across the board when compared to traditional platforms. This figure came from the results of more than three million individual transactions totalling $250 billion in value, confirming that the savings are not a one-off. Learn more about the benefits of the HSBC FX Everywhere platform in the PDF attachment to this post.

 Thibaut de Roux has an interest in how blockchain can be used to cut costs and transaction time in the foreign exchange industry. 

Innovative blockchain technologies are now changing the face of the financial services industry in many ways. The evidence from HSBC shows that costs can be cut significantly where blockchain is implemented.  

Distributed Ledger Technology 

Blockchain is a form of distributed ledger technology, or DLT, which has been used by HSBC for approximately 18 months to date. In the first year of use, not only were three million FX transactions settled, but a further 150,000 payments were made through the DLT system. A press release from the bank in January 2019 cited significant opportunities and efficiencies, particularly through being able to verify settlement of payments securely without recourse to external confirmation. The press release also talked positively about consolidation for viewing cash flows and the unification of trade data within the company. HSBC is now exploring how the same technology can be used to improve services for multinational clients, who regularly need to deal with foreign currency exchanges as money flows both through the organisation and along cross-border supply chains. 

Introducing Blockchain 

Foreign exchange is not the only area where blockchain could alter the landscape permanently and dramatically. Across the wider financial services industry, more and more companies are beginning to adopt the technology as firms start to revolutionise their business models. However, as with any new technology, adoption will take some time to become widespread. Looking back at the introduction of technologies such as internet banking or mobile banking, it is clear to see that many of the major players in the market prefer to wait until technologies have been developed to a certain level before they choose to adopt them. Blockchain is only just beginning to reach that level of development and so, while we will see it emerging, it may still take some time before it becomes ubiquitous. 

Some market statistics for blockchain can be viewed in the embedded infographic. 

A Trustworthy Technology 

One of the key benefits of blockchain technology is the level of trust it provides for every transaction that takes place on the network. Trust and transparency are essential aspects of any financial service, so it makes sense that the financial industry would be one of the first to turn to blockchain solutions. In terms of foreign exchange, one of the biggest challenges traditionally faced has been the time-consuming nature of dealing with each transaction. When banks and financial institutions can utilise blockchain, these services become faster, cheaper and more efficient. The knock-on effect of this is that the banking system becomes more affordable. 

Blockchain has been proven to work as a trustworthy solution to the former issue faced by the cryptocurrency market of double spending. Learn more about this in the short video attachment.