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The IT company and consulting firm CGI, Group Inc. announced on October 21 a new partnership with the National Bank of Canada and Skuchain, a technology company optimizing the supply chain, as part of a pilot program that will simplify and improve the procurement process of “negotiation of letters of credit and guarantees.”
Blockchain to Revolutionize Traditional Letter of Credit Settlement
According to the press release, CGI will integrate its CGI Trade360 financial platform with Skuchain’s contractors, use smart contracts and record the complete life cycle of transactions in a distributed book. To date, negotiations on standby letters of credit and warranties have been a tedious process, surrounded by opaque and inevitable errors, and communication was mostly by e-mail.
The CGI contract negotiation tool will improve the response time and automate the coordination for the issuance of a standby credit letter or guarantee, by using pre-approved template bank in the blockchain platform. Since the negotiations procedure will be done by using smart contracts, all conditions will be visible to all beneficiaries in real time, in a secure environment guaranteed with blockchain technology.
Representatives of all parties expressed their enthusiasm for this pilot project, recognizing the possibilities offered by this cooperation. Patrice Roy, Vice President of Payments, Treasury Management and International Solutions at the National Bank of Canada, said:
This pilot project provides an excellent opportunity to use block chain technology to simplify the credit card and collateral negotiation process, while being more transparent and secure, which will allow us to provide a simple, fast and efficient experience. Our business customers making your business easier to administer.
Srinivasan Sriram, The CEO of Skuchain was particularly thrilled with the fact that the standby letter of credit contract builder is the first implementation live in the new DLPC standard. He stated:
This standard is the result of more than two years of work of the distributed Ledger Payment Commitment DLPC Working Group of the Bankers Association for Finance and Trade (BAFT), led by our vice president of technology, Ranganathan Krishnan.
CGI’s Vice President of Trade and Supply Chain Frank Tezzi highlighted the benefits of applying blockchain technology to commercial financing:
The use Blockchain offers a common offers a shared ledgerthat is the only source of truth in pre-issuance negotiations and the issuance and re-reissue process. This example provides certainty and transparency for beneficiaries in the collateral regarding the guarantee process as they enter into a financial transaction.
BoC insists on blockchain technology despite past negative experience
Earlier this year, Bank of Canada participated in another blockchain project called Project Jasper for immediate security establishment. In any case, the banking representatives are not sure of the effectiveness of blockchain technology to reduce operating costs As a result, cooperation with CGI and Skuchain could signal the move of the Bank of Canada to Distributed ledger technology, recognizing that the adoption of state-of-the-art solutions would strengthen the relationship between banks and customers.