Decentralized Letters of Credit

The pain point: Manual document verification, courier delays, and bank-to-bank communication create a 5-10 day issuance cycle, stalling shipments.

The blockchain fix: A shared, immutable ledger allows all parties (importer, exporter, banks) to view and verify documents in real-time. Smart contracts automate approvals against predefined rules, slashing issuance to under a day.

Real example: Marco Polo Network, powered by R3 Corda, reduced processing time for a letter of credit from 10 days to under 4 hours for a pilot transaction between Germany and China.

Replace 5-10 day paper-based processes with automated, smart contract execution. This reduces processing costs by up to 80% and cuts settlement times from weeks to hours. Key benefits include:

• Automated compliance checks against trade terms.
• Elimination of manual document reconciliation.
• Reduced bank fees and courier costs.

Example: A pilot by HSBC and ING for a soybean shipment from Argentina to Malaysia reduced document processing time from 10 days to 24 hours.

Create an immutable, shared audit trail visible to the buyer, seller, and all banks. This drastically reduces the risk of document fraud, duplicate financing, and discrepancies.

• Real-time tracking of shipment milestones and document status.
• Tamper-proof records of ownership and compliance.
• Single source of truth eliminates disputes over terms.

Example: The Marco Polo Network, used by banks like BNP Paribas, provides end-to-end visibility, allowing all parties to see the LC lifecycle in real-time, preventing common fraud schemes.

Unlock capital trapped in slow processes. Tokenized assets and faster settlements improve cash flow for SMEs, who are often excluded from traditional trade finance.

• Faster payment upon proof of shipment via smart contracts.
• Fractional ownership of trade assets opens new funding avenues.
• Reduced risk for financiers leads to better rates for borrowers.

Example: Contour's blockchain network enables risk distribution, allowing smaller banks to participate in syndicating large LCs, increasing liquidity in the market for SMEs.

Automate regulatory reporting and Know Your Customer (KYC) checks. Smart contracts can embed compliance rules, reducing manual review and audit preparation time.

• Automated sanctions screening against immutable records.
• Instant generation of audit reports from the blockchain ledger.
• Reduced operational risk and regulatory penalties.

Example: Komgo's platform digitizes trade documents, allowing for automated AML checks and providing regulators with secure, permissioned access to verified data, simplifying compliance audits.