One of the largest banks in Vietnam, HDBank, has become the first entity in the country to issue letters of credit (L/C) through a blockchain platform, local news outlet Việt Nam News reported on 6 January.
According to the publication, using blockchain to complete the entire L/C issuance process has brought the bank one step closer to its goal, to become a “Happy digital bank”. Participating in this blockchain-based L/C transaction were Century Synthetic Fiber Corporation, a leading fibre importer, and Tainan Spinning, a Taiwanese yarn manufacturer, along with CTBC, HDBank’s L/C advising bank in Taiwan.
Through the use of blockchain technology, HDBank is able to offer its clients higher level of security, reduced time for processing the transaction — which the bank claimed took only 2 hours — and a permanent record of the transaction. L/Cs are an important document when it comes to international trade. They provide the seller with the guarantee, from institutions such as banks, that a payment will be made on time and for the correct amount.
HDBank became the first Vietnamese bank to join the Contour open trade finance network back in May 2020. Built on R3’s Corda, the Contour network focuses on digitizing the L/C process in order to bring more efficiency in the markets. The CEO of Contour, Carl Wegner, said at the time:
“To fully unlock the potential of what enterprise blockchain can bring to trade finance, banks and corporates need to be able to collaborate and forge new connections. That is the ultimate aim of Contour, and it’s something we’re continuing to see as we welcome HDBank into the network.”
While it is the first bank in Vietnam to use blockchain tech for issuing L/C, HDBank is not the first in the world. That title goes to Standard Chartered Bank, which in August 2019 used the Voltron blockchain platform to digitise and simplify the process, and issue the first cross border L/C transaction.