INDORAMA VENTURES PUBLIC COMPANY LIMITED (IVL), through its wool industry subsidiary, Indorama Holding Ltd., has successfully executed a blockchain-enabled Letter-of-Credit (LC) transaction with TECHWOOL TRADING PTY LTD (Techwool) using the Contour blockchain platform. Both IVL and Techwool are active partners in the wool and yarn industry.
This is the first Contour LC transaction for both IVL and Techwool. The blockchain transaction involved a shipment of scoured wool shipped from Techwool in Australia, to IVL in Thailand. This was an end-to-end trade between IVL as the buyer and Techwool as the seller completed on a single shared application called Contour, rather than multiple systems. HSBC acted as the issuing and advising/nominating bank for both sides.
A Letter of Credit is a guarantee of payment from a financial institution to the seller subject to the seller meeting clearly defined terms and conditions set out in the LC.
The transaction demonstrates that blockchain is a solution to trade digitization and is commercially and operationally viable. Trade transactions conducted using blockchain technology allow all parties to review documents in near real-time, which in turn reduces cost, risk and lead times. Bain & Company estimates that blockchain could increase global trade volumes by $1.1 trillion by 2026, from the current base of $16 trillion[i]. Conventional exchanges for paper-based documentation related to letters of credit usually takes between 7-10 days. This exchange was done on the Contour platform in under 24 hours.
Mr. Krisda Phatcharoen, Country Head of Commercial Banking, HSBC Thailand, stated, “We are pleased to be able to support IVL’s endeavors in digitizing its trade finance processes. HSBC believes that the use of technologies like blockchain and the Contour platform in particular will serve businesses well, especially in this restrictive environment brought about by the COVID-19 pandemic. Digitization is the way forward and we are glad to support IVL to successfully adopt this technology for their business.”
Mr. Rajesh Banka, CEO of IVL’s wool business said, “Contour-enabled trade transactions have offered an insight into how the technology has the potential to revolutionize conventional trade finance and reduce the time frames and risk involved in cross-border trade. IVL will continue to pursue this technology with HSBC as a fit with our digitalization transformation project.”
According to the UN, digitizing Asia-Pacific paper-based trade could reduce export times by 44%, cut costs by 31% and boost exports by US$257 billion a year[