Eleven banks are collaborating on a prototype application for letter of credit (L/C) processing over a platform developed by financial innovation company R3, which leads a consortium of dozens of the world's largest financial institutions in the research and development of blockchain or distributed ledger solutions.

The Corda platform over which the application runs claims the potential to improve efficiency and save costs in sight L/C processing.

Pilot programme

The Corda platform has now been developed to incorporate shippers and carriers.

This means that several R3 consortium members are now in a position to pilot the platform with the aim of rolling out a live version in 2018.

Banks involved in developing this standby L/C application include Bangkok Bank, BBVA, BNP Paribas, HSBC, ING, Intesa Sanpaolo, Mizuho, RBS, Scotiabank, SEB and US Bank.

L/C optimism

Consortium members, including the global head of at BNP Paribas' trade competence centre, Marguerite Burghardt, think the digitalisation of L/Cs is very good news.

"While L/Cs have not progressed as much as the open account business in recent years, they remain a good way to finance trade and mitigate risks," she says.

"If the industry manages to make the whole process fully digital [and] transparent...this could mean renewed development and wider access to this financing technique," she concludes.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.