Several international banks are teaming up with tech giant IBM and Swiss Bank UBS to use blockchain technology to support and build a new global trade platform called Batavia. According to Reuters, the banks are Commerzbank AG, Bank of Montreal, Erste Group Bank AG and CaixaBank SA.

Batavia is a trade platform which will support trade finance, a process where banks help finance transactions between international importers and exporters through issuing letters of credit and funding. In a blog post releasing details about the collaboration, IBM observed that the process of filing paper forms to finance these transactions “can take days up to weeks” and that “delays caused by errors and manual processing can make it difficult for companies to access financing, which could cause business to grind to a halt.”

The banks and IBM will work together to construct Batavia, which should be ready for use by transportation organizations looking for trade finance to haul goods from anywhere using any method of transportation.

They will also collaborate with other transportation organizations to ensure that said organizations are not left confused by the new technology.

The power of blockchain

Blockchain may be best known for its association with the cryptocurrency Bitcoin, but financial institutions and tech experts have long been interested in its potential as a means to make transactions both open to the public and secure.

As Ars Technica describes, blockchain at its simplest is a record of transactions comparable to an ordinary ledger. Today, we have to rely on a complex system of auditors and government regulations to ensure that any one ledger is accurate, and even then mistakes and fraud can happen.

Secure transactions

What blockchain does is secure the records in a blockchain transaction, which is then tied with other transactions to form a block.

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The key is that the blocks are distributed by and viewable by every participant in the blockchain ledger, which is then timestamped as part of a chain. Altering a single block would require not just editing the block, but editing the entire chain which is distributed on a decentralized network and thus requires breaking into many computers all at once.

In Batavia’s case, blockchain would end the practice of each participant in a trade deal, such as small business financing, having to keep their own separate ledgers, which means wasted time as the parties work to make sure the ledgers are on the same page. The blockchain would mean that each party would be working out of the same ledger, enabling transactions to be done in hours rather than days.

IBM in particular has had a major interest in blockchain, as it launched IBM Blockchain in March to study how it could be used in other businesses. The tech giant is exploring how blockchain can be used to help businesses track their supply chains, share data, and ensure regulatory compliance.

In addition to the Batavia project, that IBM would be partnering with food giants like Nestle and Walmart to help trace the source of contaminated food using blockchain.