Blockchain Contract Negotiation Tool Piloted By National Bank Of Canadabr>
Consulting services firm CGI, the National Bank of Canada (NBC) and blockchain startup Skuchain have partnered on a blockchain pilot that aims to improve and streamline the process for negotiating standby letters of credit and guarantees.
A standby letter of credit (SLOC) is a lender’s guarantee of payment to an interested third-party in the event the client defaults on an agreement. The bank issuing the SLOC performs general underwriting duties to ensure the financial credibility of the party seeking the letter of credit. Then it sends a notification to the bank of the party requesting the letter of credit. SLOCs are currently conducted via email, making them prone to errors and delays in a process that lacks transparency for beneficiaries regarding terms and approval status.
CGI said that it has integrated its end-to-end global trade solution, CGI Trade360, with Skuchain’s Contract Builder, an application built on the startup’s Brackets platform for smart contracts on a blockchain. The result of the integration is a blockchain contract negotiation tool that is “enormously effective in the standby letter of credit and guarantee process.”
The tool will reportedly enable NBC to provide trade finance services digitally to customers conducting business on a blockchain B2B solution. NBC customers will be able to initiate, conduct and conclude negotiations of standby letters of credit and guarantees entirely on smart contracts that can intelligently construct agreements and securely communicate any changes in terms to relevant parties. The tool will improve processing times, reduce risks and help strengthen the bank’s customer relationships. It will aslo offer visibility across the lifecycle, lower costs for all parties, increased security and more effective collaboration.
Patrice Roy, Vice President, Payments, Cash Management and International Solutions at National Bank of Canada, said that the pilot project is a great opportunity to leverage blockchain technology to simplify the process for negotiating standby letters of credit and guarantees while making it more transparent and secure.
“This will enable us to offer a simple, fast and efficient experience to our commercial clients which facilitates managing their business,” Roy said.
Frank Tezzi, Vice-President of Trade and Supply Chain Solutions at CGI, said that the use of blockchain offers a shared ledger that serves as the single source of truth during pre-issuance negotiation and through issuance and re-issuance processes.
“This example provides certainty and transparency for beneficiaries regarding the guarantee process as they enter into a financial transaction,” Tezzi said.