The decline in letter of credit (L/C) usage within supply chains is slowing according to a recent survey.

The Misys Transaction Banking Survey also suggests a slowing of the trend for supply chains to marginalise bank trade finance products in favour of open account payments.

Slowing trends

Research into transaction banking trends carried out by Misys indicates that the financial crisis appears to have slowed two recent and related trends dominating the provision of trade services.

These are the increasing marginalisation of banks in the financial supply chain and declining L/C usage according to the survey commissioned by the financial services software developer.

Survey findings

Over the past year, nearly two-thirds of those surveyed reported an increase in their banks' involvement in their customers' trade business.

The financial crisis has made risk mitigation more important to banks involved in the financial supply chain with 90 per cent of respondents stating that this was a focus for them according to the research commissioned by Misys.

Back to basics

It says the rate at which organisations are turning towards open account transactions appears to be slowing too.

According to the survey, only 25 per cent of bankers reported that open account is taking up a larger proportion of the trade business, compared with 40 per cent reporting that traditional trade finance was taking a greater share than before the crisis.

"Banks are still looking at traditional trade finance instruments, such as L/Cs, as a very important part of their corporate offering, according to solutions director of transaction banking at Misys," Olivier Berthier.

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