The CEO of New York-based TradeCard, Kurt Cavano, continues his campaign to topple letters of credit (L/Cs) as a preferred method of international payment.

In an interview in the Hong Kong edition of the China Daily, he argues that it is time to make L/Cs electronic and he suggests changes in this direction are unlikely to be initiated by banks.

Paper reliance

Cavano says he sees it as ironic that companies worldwide, which have done so much to automate buying and settlement processes, still pay for goods in a paper-based system.

"Most companies still use paper...companies have automated bits and pieces of this stuff but nobody's automated the whole thing," he says. TradeCard operates a web-based trade finance system that could according to the company replace L/C transactions under some circumstances.

Benefits

Cavano argues that utilising a system such as TradeCard instead of paper-based systems such as L/Cs would reduce paperwork, transaction costs and improve transparency.

By conducting financial services electronically at more competitive prices, buyers and sellers can use "cheaper and easier to use" electronic guarantees instead of L/Cs, for instance, the China Daily article says.

Reluctant banks

Changing the way banks do business will take time says the article, which adds that "banks have been reluctant to change from a lucrative paper-based transaction model."

Cavano appears to put TradeCard forward as a potential agent of change in this area. "It sometimes takes an outsider to change the way things are done. We hope that all the banks will work with us eventually, but it will take a while for them to get out of their comfort zone," he is reported as saying.

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