|The blockchain LC at VPBank brings huge benefits for import-export firms, especially in the context of the COVID-19 pandemic. — Photo courtesy of the bank
HÀ NỘI — VPBank has successfully tested the entire first letter of credit (LC) transaction process on the blockchain platform, making it one of the few banks in Việt Nam applying this technology.
The successful development of blockchain LC also marks a new step in VPBank's strategy of digitising financial services and supporting businesses, especially as the COVID-19 pandemic is having a great impact on the economy and the world.
Accordingly, the trial LC transaction for coffee purchase contract of Vĩnh Hiệp Company Ltd (among top 10 leading coffee export companies in Việt Nam) was successfully implemented by VPBank on contour's blockchain platform in less than two hours, instead of weeks or even months like traditional LC transactions.
In fact, the biggest challenge that banks are facing in LC transactions is reducing paperwork, shortening processing time, shortening payment time and making information transparent. VPBank's successful execution of the above coffee purchase contract is the clearest and most concrete proof of the technology’s effectiveness. Blockchain LC is predicted to change the entire LC transaction process.
All contract information was uploaded to the system and encrypted to ensure high security with unlimited storage capacity. Sellers, buyers, issuing banks, advising banks and confirming banks could immediately track and update the transaction status, helping shorten the geographical distance and speed up the process.
The most special feature of the blockchain LC transaction is the guarantee of the International Finance Corporation (IFC), a member of the World Bank group, and the confirmation and financing of SMBC Bank, a subsidiary of Japan's second largest financial group Sumitomo Mitsui. The participation of the two leading financial institutions in the world not only ensures accuracy and international standards, but also guarantees the safety of transactions, thereby affirming VPBank's reputation in the international market.
Nathalie Louat, IFC Global Director of Trade Finance and Supply Chain, said: "Digital transactions not only help reduce costs and trade risks, but also promote better integration in emerging markets, thereby supporting trade growth. IFC is pleased to join VPBank and SMBC's digitalisation efforts."
A VPBank representative said the successful issuance of LC on the blockchain platform is the optimal solution to solve the problem of payment guarantee for international trade transactions of import and export enterprises in the context of the pandemic that impacts the Vietnamese economy and the world in general. Cost reduction as well as transaction transparency are the top priorities.
Blockchain LC is the next step of the LC Online service that VPBank recently launched on different versions of the VPBank NEO digital banking platform. With LC online, customers will not have to waste time and effort to submit original documents by traditional method, thus saving a considerable amount of money.
“The application of blockchain technology to LC issuance and LC Online service implementation has not only affirmed VPBank's pioneering role in continuously searching for suitable technologies to digitise banking services, thereby improving the quality of banking services, giving customers the best experience, but also contributing to creating favourable conditions for import-export businesses to boost production in the last wave of import and export in the year-end months,” he added. — VNS