Blockchain Platform For Promissory Note Loans Created By German Banks

Four German banks have joined forces to create a blockchain platform for promissory note loans.

Promissory notes are financial instruments that contains a written promise by one party (the note’s issuer or maker) to pay another party (the note’s payee) a definite sum of money, either on demand or at a specified future date. It typically contains all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer’s signature.

In a press release, DZ Bank, Germany’s second-largest bank by assets, said that it worked with DekaBank, dwpbank and Helaba to create finledger, a blockchain platform that enables fully digital processing of promissory note loans. According to the release, the four banks successfully carried out a pilot promissory note loan transaction through the finledger blockchain platform.

The banks believe that while there are existing digital solutions for structuring and placing promissory notes, the finledger blockchain platform digitizes the entire process, including trade confirmation and document generation. They are also planning to extend it to the full lifecycle, such as assignment and termination.

“The finledger platform reduces the number of individual steps by more than 50% compared to the previous multi-stage handling process,” DZ Bank said. “The highly manual and time-consuming handling process is thus considerably simplified and accelerated. The use of blockchain technology also reduces process risks and costs. The automatic authenticity check provides additional security for transactions and corresponding certificates can be created digitally using the electronic signature.”

The pilot transaction is the first step of finledger’s two-stage go-live. After the second pilot, which will involve third parties, finledger will be opened up to the rest of the industry.

“The successful conclusion of the pilot project sets the course for the industry-wide launch of the platform in the two-stage project phase,” said Dr Jürgen Wiedmann, Head of Information Technology at Helaba. “We have built on our initial experience in the digital placement of promissory note loans and focused on where existing solutions are reach their limits. For Helaba, finledger is another success in a series of digitisation initiatives.”

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