Spanish Banking Giant BBVA Issues €75m Corporate Loan Using Blockchain Technology
Blockchain technology that underpins digital currencies is making further inroads in the banking sector and is now being seriously considered to bring a transformational change in their products and services.
In the first-of-its-kind attempt in the banking sector, Spanish banking giant - Banco Bilbao Vizcaya Argentaria (BBVA) - has successfully completed issuing a corporate loan worth €75m ($91 million) with the entire process - from negotiations to the signing of the loan - is performed on a mutual blockchain platform.
According to the Financial Times, the corporate loan was issued using two different blockchains. A private blockchain was used for completing the negotiation process while all terms of the contract were completely registered on the Ethereum’s public blockchain.
The bank reported that the use of the blockchain technology had cut the negotiation time from ‘days to hours’ while calling the entire process as “significant advance in the exploitation of [distributed ledger] technology”.
BBVA chief Executive, Carlos Torres Vila said: “Blockchain can offer clear advantages for all sides in the corporate loan market in terms of efficiency, transparency, security. It’s another strong example of how disruptive technology can be used to add value to financial services, something that is central to our strategy.”
Vila also said that apart from completing this pilot with the Spanish telecom giant Indra, the bank also has many such similar transactions in the pipeline. Borja Ochoa, Indra’s director of financial services, said blockchain was “destined to become one of the technologies that will change the way we interact with products and financial services” and that the pilot “strengthens the position of BBVA and Indra as leaders in the practical application of blockchain technologies.”
The use of a single blockchain technology is seen as an effective replacement to the myriad of different systems used for transactions. Also, blockchain holds a huge potential in lending corporate or syndicated loans over the consumer loans. This is because corporate loans are more complex in nature and the records need to be accessed by a large number of people.
Note that this is not the first experiment by BBVA is leveraging blockchain technology in order to streamline its banking services. BBVA is a member of the R3 consortium and has been investing since long in upgrading the banking process through the use of blockchain technology since long.
Last year at the end of 2017, the Spanish bank used the Distributed Ledger Technology in a paperless trade transaction and to automate the document presentation in an import-export deal between Latin America and Spain. The use of DLT helped to drastically reduce the transaction time for sending, verification, and authorization of foreign trade from 7-10 days to just 2.5 hours.
Ricardo Laiseca, BBVA’s Head of Global Finance for Corporate and Investment Banking, said: “BBVA is involving its clients in project processes such as requirements definition, development, and implementation. In this way, BBVA provides its customers with not only the best financial solutions, but also the most advanced technical and innovative capabilities.”