The application mirrors the traditional paper-intensive letter of credit (LC) transaction methodology used for sharing information between exporters, importers and their respective banks but does this on a private distributed ledger. This then enables the users to execute a trade deal automatically through a series of digital smart contracts.
Trade finance processes are typically time and labour-intensive, involving multiple documents and checks to reduce risk and provide assurance to sellers, buyers and their banks. An LC, or documentary credit, is essentially a guarantee provided by a bank that a seller will receive payment from a buyer once certain conditions are met; for example, once the seller can provide proof that they have shipped the buyers goods.
The consortium utilised the Linux Foundation open-source Hyperledger Project blockchain fabric whose development was supported by IBM Research and IBM Global Business Services.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now