According to the latest reports on Sept. 6, 2021, BNY Mellon has joined consortium endeavors to bring blockchain technology into global trade finance and digitizing the procedure of facilitating working capital to both suppliers and purchasers across the world. Digital trade finance is the need of the hour for traders to survive in the post-pandemic world.
The BNY Mellon’s association with Marco Polo Network will enable the company to bring more liquidity into the global supply chain to avoid supply chain management risks effectively as well as help in offering supply chain finance solutions including payables financing and receivables discounting to suppliers who are engaged in the shipment of goods and services to their importers globally.
The Marco Polo Network is a consortium of around 45 banks offering an open software platform for trade, payments, and working capital financing to banks, corporates, and other market members. The cloud-based blockchain-inspired network enables uninterrupted, safe, and quick exchange of trade data assets in a multi-channel environment.
Letters of credit – Knowing the different typesGenerally the international traders need help of financial intermediaries like banks for guaranteeing payments and also the assurance of delivering goods on time.
Letters of credit usually accomplish their goal by playing the role of a substitute to the credit of the bank to that of the client mainly for facilitating trade.
Such a letter is issued by a bank to guarantee full payment and timely payment to the seller.
Under a circumstance where the buyer is not able to make such a payment, the bank will either cover the entire amount or the remaining amount on the buyer’s behalf.
This letter is granted against a pledge of cash or securities as collateral.
Banks also collect a fee which is a percentage of the total amount of letter of credit.
