A new start trade finance provider says its proprietary online payment system has enabled one of its customer's to bypass letters of credit (L/Cs).

Traxpay claims that as a result, an unnamed UK-based oil importer trading with Saudi Arabia is making substantial savings.

Cost cutting

According to an announcement by Traxpay, the importer used to purchase oil using L/Cs from its bank under an arrangement in which the company had to keep US$250 million of its working capital in the bank and pay interest at a rate of 2.25 per cent on that amount.

Using Traxpay, which has been described as a business-to-business version of the PayPal electronic payment system, the company no longer needs to commit its working capital and pays an interest rate of less than one per cent.

Traxpay

Led by senior executives from the banking and technology industries in Europe and the US, Traxpay is a privately held company with offices in Mountain View, California, and Frankfurt, Germany.

In June 2012, the company announced a US$4 million investment led by Germany's Earlybird Venture Capital.

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