Recently, HDBank is the first bank in Vietnam to issue an LoC (Letter of Credit) through blockchain technology. This development will introduce a significant change in the banking system of the nation. Vietnamese HDBank has declared that it will issue LoC by employing blockchain technology. The financial institution will explore the local digital market to provide the LoC utilizing blockchain technology.
Comprehensive details about Letter of Credit
An LoC resembles a bank letter, ensuring that a buyer’s payment to a seller will appear at a pre-determined amount and time. HDBank has fulfilled the issuance, document presentation, and successful settlement of letters of credit on the blockchain platform. Thus, designating a new milestone for becoming a “happy digital bank.” Moreover, the institution will offer its clients with outstanding LoC transaction systems and blockchain technology on a test basis.
The first transaction participants were a local fibre importer and a Taiwanese yarn manufacturer, along with the LoC advising bank in Taiwan. Letters of credit are essential documents in international trade. They offer a creditworthy institution guarantee, like a bank. It will collect a buyer’s payment to a seller on time and for the correct price. In reality, the bank underwrites the payment. Moreover, the team will also involve CTBC, the LoC advising bank in Taiwan. Utilizing blockchain technology for LoC has various advantages, like providing a higher security level and a permanent record of the transaction. Furthermore, it also decreases the time required to process such transactions in a matter of hours.
According to the report, blockchain-based LoC transactions offer users with greater security related to conventional methods. They succeed in reducing the transaction processing time, reducing both paperwork and uncertainty of eventual errors, etc. Based on the HDBank’s collaboration with comprehensive banks and institutions worldwide and blockchain technology, the letter of credit ensures security the receivers. Moreover, it develops hassle-free transactions plus an immediate flow of accurate and secure data.
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