Natixis, IBM and Trafigura Introduce Blockchain Solution For U.S. Crude Oil Market

Natixis, IBM and Trafigura have pioneered the first blockchain solution in commodity trade finance for US crude oil transactions.

The distributed ledger platform, built on the Linux Foundation open source Hyperledger Fabric, allows major steps in a crude oil transaction to be digitized on the blockchain, ensuring improved transparency, enhanced security, and optimized efficiency.

By having the buyer, seller and their respective banks all on the same ledger, all parties can simultaneously view and share data on the status of a transaction, from the time a new trade is confirmed and validated, to when the crude oil is inspected, to its final delivery and cancellation of the letter of credit.

This initiative is part of a broader effort to modernize trading in the global crude oil industry, which today is predominantly driven by manual, non-digital processes.

Key benefits of the solution include reduced cash cycle times, improved efficiency via lower overhead costs and fewer cost intermediaries, increased transaction visibility to help reduce the threat of tampering, fraud and cyber-crime, and the creation of transparent transactions by using shared processes and recordkeeping.

The new trading platform allows trade documents, shipment updates, delivery and payment status to be shared across a single shared ledger, helping to reduce transaction time, duplication of documents and authentication processes among all trading partners. Traditionally these transactions require complex workflows and paper-based processes in which documentation is shared through courier, fax and email exchange. The solution, which is hosted on IBM’s cloud platform, Bluemix, was led and delivered by IBM France.

“Natixis wants to use blockchain to enhance client service by optimizing the antiquated arena of commodity trade finance,” said Arnaud Stevens, Natixis’ New York Head of Global Energy & Commodities. “The current process is paper and labor intensive, we have multiple friction points with high processing costs and limited automation. Distributed ledger technology brings some much-needed innovation into our industry.”

The platform will soon be expanded to allow all parties in the transaction to enter data directly onto the blockchain. For example, the shipping company, pipeline operator, inspector or warehouse can provide real-time status updates via the blockchain on the crude oil transaction, helping lower the risk of fraudulent transactions.

More importantly, the distributed ledger for crude oil transactions is designed to be adopted at scale across the entire industry. By creating a shared permissioned ledger for use across all trading partners, including multiple buyers, sellers, banks and trading partners, even further efficiencies can be anticipated.

You can learn more about IBM Blockchain solutions here.