Indian importers should ditch letters of credit (L/Cs) in favour of supply chain trade finance according to the founder of a fintech focused on alternative ways for corporate importers to control how their international suppliers are funded and paid.

In an opinion piece published by the US' CNBC business news channel, founder and CEO of PrimaDollar Tim Nicolle has written an opinion piece in which he suggests finding a new way to handle imports without L/Cs is imperative and supply chain trade finance (SCTF) is the solution

L/C popularity

The L/C is expensive according to Nicolle, who says it can often represent 3 or 4 per cent of the landed costs of goods. He says the L/C is time-consuming, with many pitfalls and traps for the unwary or inexpert customer and many suppliers would rather not use it.

Yet he concedes that most Indian companies still tend to provide L/Cs because of a lack of payment trust.

Alternative financing

Finding a new way to handle imports without L/Cs is imperative according to Nicolle who claims SCTF is the solution India's importers have been looking for because it obviates the need for L/C process.

The PrimaDollar founder also reckons typical cost savings are 1-2 per cent of the landed cost of goods, and trades are organised same day instead of over a week or more via the L/C route.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.