Where Credit Is Due
The issuing and use of letters of credit are about to get a whole lot easier as LC lite has announced on February 11, 2019, that they will be launching a platform that makes use of blockchain technology to streamline the process. This new platform will be done in conjunction with the founders of Incomelend, an income financing firm.
There is a huge market for this as the transactions conducted with letters of credit are over $2.3 trillion annually. This platform is designed to “improve cash flow for trade parties and enhance security by reducing fraud and default payments.”
Incomelend, on their part, is used to working with large sums as their current processing volume is $240 million per year and this figure is expected to surpass $1 billion in the next three years.
Improving the Industry
Letters of credit are a very important part of global trade as they help to facilitate the business between importers and exporters. However, LC lite estimates that up to 80 percent of letters of credit contain some form of discrepancies. By adopting a blockchain process, the human error margin is practically eliminated.
The platform intends to do this by introducing the ‘LC Lite Token’ which will serve as the means of exchange on the platform and also makes the LC contract a tradable asset. However, LC lite’s ambitions extend beyond merely creating a platform for letters of credit as they hope to displace interbank Institutions for international trade.
“LC Lite’s blockchain typically replaces intermediaries by capturing the unique data of a transaction in an immutable and transparent chain of records. Its smart, self-executing contract features perform transactions automatically upon fulfillment of specified conditions in a digital Letter of Credit between the buyer and the seller,” said Dimitri Kouchnirenko, the Founding Partner of Incomlend and Co-founder of LC Lite.
The role of blockchain in international trade cannot be ignored at this point. The World Trade Organization has estimated that the use of the technology will add trillions to the industry over the next few years and its use in the logistics industry has also grown in recent times.