Lloyds Bank has announced it is using blockchain technology to support its plans to digitise trade documentation and trade finance products.

The bank, which has entered a long-term partnership with blockchain technology company Enigio, said that the move will widen the application of the technology for digital original documents, including promissory notes, bills of exchange, and bills of lading.

The technology allows digital documents to be 'possessed' by an individual and transferred between parties, while originals can be distinguished from copies like paper-based counterparts. This means digital documents can be used in processes where an ‘original’ document is required.

The move comes after the bank completed the UK’s first transaction using a digital promissory note purchase last year.

Promissory notes are used to complete purchases in lieu of cash, allowing a purchaser to obtain goods or services based on their creditworthiness. While they have been around for thousands of years, in a modern setting their use is typically limited to large transactions that often involve the sale or purchase of property.

At the time, the bank said that the law these notes currently fall under has hindered innovation because it requires them to be a physical entity. The transfer of physical paper notes between banks and notaries means it can take a week or more for businesses to be paid.

Lloyds is also looking at potentially using the blockchain technology within wider trade finance products, like documentary collections and credits.

“Existing industry-wide trade solutions are, comparably, much slower, more cumbersome and more environmentally intensive than their digital counterparts, involving upwards of 28 billion pieces of paper, globally every year,” said Gwynne Master, managing director, lending and working capital, Lloyds Bank. “Digitisation makes processes faster, cheaper and more secure. We support the adoption of digital trade documents and look forward to collaborating widely with our clients and partner banks to support their continued uptake.”

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