Microsoft announces collaboration with Bank of America Merrill Lynch on blockchain technology

Blockchain is an emerging way for businesses, industries, and public organizations to almost instantaneously make and verify transactions—streamlining business processes, saving money, and reducing the potential for fraud. Microsoft Azure already offers Blockchain as a Service (BaaS) which provides a rapid, low-cost, low-risk, and fail-fast platform for organizations to collaborate together by experimenting with new business processes.

Today, Microsoft announced their collaboration with Bank of America Merrill Lynch on blockchain technology to fuel transformation of trade finance transacting. As part of this collaboration, Bank of America Merrill Lynch and Microsoft will build and test technology, create frameworks, and establish best practices for blockchain-powered exchanges between businesses and their customers and banks. Microsoft Treasury experts will serve as advisors and initial test clients, establishing the first Microsoft Azure-powered blockchain transaction between a major corporate treasury and a financial institution.

By working with Bank of America Merrill Lynch on cloud-based blockchain technology, we aim to increase efficiency and reduce risk in our own treasury operations,” said Amy Hood, executive vice president and chief financial officer at Microsoft. “Businesses across the globe — including Microsoft — are undergoing digital transformation to grow, compete and be more agile, and we see significant potential for blockchain to drive this transformation.”

The current trade finance processes are highly manual, time-consuming and costly. Microsoft is trying to change it with blockchain so that processes can be digitized and automated, transaction settlement times shortened, and business logic applied to related data, creating benefits for businesses and financial institutions including more predictable working capital, reduced counterparty risk, improved operational efficiency, and enhanced audit transparency, among other benefits.

“The potential benefits of blockchain will help drive meaningful supply-chain efficiencies to the clients of both Microsoft and the bank. This project is another example of our continued commitment to introduce financial innovations for the betterment of global commerce,” said Ather Williams, head of Global Transaction Services at Bank of America Merrill Lynch.

“We are excited to be working with Microsoft on this groundbreaking blockchain proof of concept that has the potential to help redefine, digitize and improve how trade finance instruments are executed today,” said Percy Batliwalla, head of Global Trade and Supply Chain Finance at Bank of America Merrill Lynch.

Development and testing of the initial application, built to optimize the standby letter of credit process, is currently in progress. Both these companies will work to refine the technology and evaluate applications to include more complex use cases and additional financial instruments in the future.