As part of its ambitious plans to eliminate the physical delivery of paper in trade finance operations, Lloyds Bank has developed a new solution where clients can request digital direct guarantees and standby letters of credit (L/Cs), helping them to trade more efficiently, safely, and securely.

Direct guarantees and standby L/Cs are those where the undertaking is not being issued or sent via another bank. Undertakings being sent via another bank will continue to be issued on a paperless basis via the SWIFT network as they are today

Digitising trade

The largest UK retail and commercial financial services provider's paperless guarantee initiative, created to support businesses that have a high volume of transactions requiring bank guarantees to be issued, enables instant delivery to recipients while reducing their carbon footprint.

This is Lloyds' latest investment in supporting the move towards digitising trade and closely follows its successful completion of the first digital trade transaction under the UK's new electronic trade documents act when it came into force on 20 September.

Lloyds was also the first in the UK to complete a transaction utilising a digital promissory note purchase in August 2022.

Enigio investment

The bank also recently announced it has invested EUR 3 million (US$3.2 million) in Enigio to help expand and accelerate the use of digital documentation in trade.

The investment will allow Enigio to expand its bespoke solution, trace:original, which removes the need to physically transfer paper documentation within trade transactions.

Eliminating paper

Lloyd's says that trade finance results in around 28.5 billion pieces of paper moving around the world each year.

Through its paperless guarantee initiative, the bank aims to further support clients who are looking to secure new business and meet contractual obligations, reduce time, cost and logistics, as well as cutting carbon emissions through reducing the need to courier paper.

Working with ABTA

Lloyds has worked with the Association of British Travel Agents (ABTA), the country's largest travel trade body, to switch to a paperless format.

ABTA manages a high volume of guarantees or bonds for its members, and Lloyds says it is aiming to introduce the new paperless guarantee initiative to other approved bond providers.

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