Bank of America Merrill Lynch, HSBC and the Infocomm Development Authority of Singapore have claimed success in demonstrating the application of distributed ledgers to replace paper-based Letters of Credit in trade finance transactions.
Bank of America Merrill Lynch, HSBC and the Infocomm Development Authority of Singapore have claimed success in demonstrating the application of distributed ledgers to replace paper-based Letters of Credit in trade finance transactions. The consortium utilised the Linux Foundations open source Hyperledger software for the prototype app with IBM Research and Services providing technical and program assistance. The application mirrors a paper-intensive Letter of Credit (LC) transaction by sharing information between exporters, importers and their respective banks on a private distributed ledger. This then enables them to execute a trade deal automatically through a series of digital smart contracts. A report by Bain in July estimated that about 50% of banks' costs for a Letter of Credit arises from manual document handling and checking, which creates delays, errors and expense.
