Our mission is simple – to transform trade through the power of people and technology.
We are accomplishing our mission and finding ways to better serve our customers, the trade finance community, and the world.
If you are unfamiliar about what it is that Traydstream does, we’ve created an AI platform that is the solution to trade’s biggest thorn – the tedious paperwork.
Our solution, which is embedded with technology such as machine learning, optical character recognition, and fully secure scalability has processed over 2 million documents and saved our clients countless hours, reduced errors, and freed up their teams’ time for more important tasks.
But let’s rewind a step and go back to the document processing. One of the documents we process the most are Letters of Credit (LC). If you are unfamiliar with what these are and why they are important, check out our blog on Letters of Credit (<insert hyperlink here/>).
LC processing can be complex due to the various parties involved and the many conditions that must be met in order for the seller to receive payment. Some reasons for the complexity include:
- Involvement of multiple parties: The process usually involves multiple parties, including the buyer, the seller, their respective banks, and potentially a freight forwarder or other intermediaries. Banks must navigate these complexities to ensure compliance with applicable laws and regulations and to minimize the risk of fraud and errors. Each party has their own requirements and responsibilities that must be met in order for the LC to be successfully processed.
- Compliance with international regulations: LC processing must comply with various international regulations, including those set by the International Chamber of Commerce (ICC) and local laws in both the buyer and seller’s countries. Banks must ensure that LCs comply with applicable laws and regulations, like UCP 600 and ISBP trade rules with failure to do so, resulting in significant financial and reputational risks. These regulations can vary widely depending on the countries involved, which can make the process more complex.
- Verification of documents: The seller must provide documents to the bank that prove they have fulfilled the conditions of the LC, such as extensive documentation requirements, including bills of lading, invoices, proof of shipment or delivery, and other trade documents. These documents must be reviewed and verified to ensure compliance with the terms of the LC, which can be time-consuming and complex.
- Language and communication barriers: The parties involved may speak different languages or have different cultural norms, which can lead to misunderstandings or delays in communication. This can make it more difficult to ensure that all parties understand the requirements and conditions of the LC.
- Dispute resolution: Disputes can arise in LC transactions, such as disagreements over the interpretation of documents or non-compliance with LC terms. Resolving these disputes can be complex and time-consuming, and can involve multiple parties and jurisdictions.
- Manual processes: Many LC processing activities are still performed manually, which can add to the complexity and increase the risk of errors. Manual processes can also be time-consuming and costly, and can limit the ability of banks to process large volumes of transactions efficiently.
LC processing requires careful attention to detail and coordination among multiple parties in order to ensure that the seller receives payment and the buyer receives the goods or services they need.
In the section above that explores some of the complications involved in this tedious process, let’s examine the benefits of solutions such as the ones that Traydstream have created.
It is no secret that technology and its evolving integration in our lives has spurned the creation of integrated digital solutions. Some of the processes enabled by technological advancement are automation and digitization.
Automation and digitization can streamline LC processing by reducing manual errors and increasing efficiency. Here are some ways in which this can be achieved:
- Digitizing documents: Instead of relying on paper-based documents, digitizing documents can help automate the verification process. This can reduce the time and cost of processing while increasing accuracy and security.
- Automated document checking: Automated software can be used to check documents for compliance with LC conditions, reducing the need for manual verification and speeding up the process. However, our platform still requires the confirmation and oversight of humans as additional verification – further reducing errors.
- Electronic data exchange: Using electronic data exchange can allow parties involved in LC processing to share information quickly and efficiently. This can reduce communication delays and errors.
- Workflow automation: Automating workflows can help streamline the LC process by reducing manual work and providing a clear view of the process. This can also help identify bottlenecks and areas for improvement.
- Integration with other systems: Integrating LC processing systems with other systems, such as trade finance or logistics systems, can help automate the process end-to-end, reducing the need for manual intervention.
So let us recap:
LC processing is complex due to legal and regulatory requirements, extensive documentation requirements, international trade considerations, dispute resolution, and manual processes. However, technology solutions such as automation and digitization can improve the efficiency, accuracy, and speed of LC processing, reducing costs and increasing customer satisfaction.
Traydstream has enabled the banks and exporters to simplify LC (and all other document) processing, which facilitates the interoperability solutions that we are looking to employ throughout the industry.