A leading banker in Indonesia says he is seeing open account trading become increasingly popular with customers.

But Citibank Indonesia's senior vice president for trade products, Risman Firmansyah, says letters of credit (L/C) will still be required in certain sectors.

Preferred transactions

Speaking at the 4th Annual Indonesia Trade and Commodity Finance Conference, Risman said open account trading is preferred by the bank's customers because it is straightforward.

He said that some customers were using factoring or forfaiting as risk mitigation or cash flow tools alongside open account transactions.

L/C usage

Despite the trend towards open account trading, Risman said that some transactions will still use L/Cs.

As an example, he told delegates that Indonesia requires the use of L/Cs for oil transactions due to their risky nature.

Bank Danamon's trade product management head, Margaret Tjahjono, reported that her bank too had witnessed a trend towards open account transactions.

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