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Microsoft and BAML to Test Blockchain for Trade Finance


Trades from $3

Microsoft Corporation (MSFT - Analyst Report) and Bank of America Corporation’s (BAC - Analyst Report) corporate and investment banking division, Bank of America Merrill Lynch (‘’BAML’’) have teamed up to implement blockchain technology in trade finance to facilitate faster, safer, cheaper and more transparent transactions.

The main objective of the collaboration is to develop and test blockchain technology before commercializing it.

We note that Microsoft’s very own cloud-based platform Azure will be utilized to test the project.

What is Blockchain?

Simply put, a blockchain is a chain of blocks, where each block represents an electronic record that cannot be revised or tampered with once it is included in the chain. Additionally, each block has its own timestamp and a link to an earlier block in the chain, which enables all the parties to have easy access to information via a secure network.

Benefits of the Blockchain

Speed: Having its origins in Bitcoin (the digital currency), the blockchain technology is believed to speed up all types of transactions as there is no need for manual processing or authentication by intermediaries.

Security: Currently trade transactions take anywhere between 7 to 10 days to complete and are vulnerable to document frauds as they involve paper trails that are often complicated. Blockchain does away with all that fuss.

Chronology: Each block in the chain is connected to an earlier block and has its own timestamp that facilitates easy record keeping in a chronological manner.

Our Take

We note that businesses throughout the world are gradually making the switch to digitization in a bid to remain competitive, agile and drive growth and blockchain could prove to be the tool to facilitate the transformation.

Though the technology is still at a nascent stage, this is not the first time that it will be tested. Per some media reports, Barclays PLC (BCS - Analyst Report) and a start-up based in Israel announced this month that they have successfully deployed blockchain technology to carry out a real-world trade deal that is a first of its kind.

Zacks Rank & Key Picks

At present, Microsoft carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology space is Avid Technology, Inc. (AVID - Snapshot Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

We note that the estimates for Avid for 2016 and 2017 have remained steady at $2.08 and $1.60, respectively over the last 7 days.

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