Today sees the Singapore launch of the trade finance blockchain Contour, formerly known as Voltron, and founded by seven global banks. The letter of credit blockchain has initiated numerous pilots in 14 countries and recently had a global trial involving 50 banks and corporates.
Letters of credit (LoC) are relatively cumbersome and paper-intensive instruments. Typically an exporter won’t ship until the buyer’s bank provides an LoC guaranteeing payment. But to receive the payment, the seller has to complete a significant amount of documentation.
The bureaucracy involved is one of the reasons why LoCs tend to be used by larger organizations. That could change with blockchain. In pilots to date, by digitizing the process, Contour has reduced the time taken from 5-10 days to as little as 24 hours. The group ran a survey, and 86% said traditional LoCs were too reliant on paperwork, and the process is becoming ‘intolerable’ for both corporates and banks.
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