Thailand, October 1, 2020 / AlexaBlockchain/ – IBM and Thailand’s Blockchain Community Initiative (BCI) has announced that their electronic letter of guarantee platform (eLG) is now available to businesses of all size.
eLG platform is based on Hyperledger Fabric and uses the IBM Blockchain. Accenture is also a consultant on the project.
BCI was formed in March 2018, and six leading Thai banks – Bangkok Bank, Krungthai, Bank of Ayudhya, Kasikornbank, TMB and Siam Commercial are its shareholders. They were joined last year by another 16 participant banks, including some that are foreign and 15 companies are now also involved.
More than 500,000 letters of guarantee worth around Baht 1.3 trillion ($43.2 billion) are issued every year in Thailand. Since its launch in late 2019, the eLG platform has processed around $300 million in guarantees. A guarantee provides peace of mind to the seller to get paid, even if the buyer defaults.
The main purposes of the eLG platform are to prevent fraud, speed up the process of issuing letters of guarantee, and to reduce costs. Paper documents are forgeable, but by storing a guarantee on a blockchain, the recipient can verify that a bank issued it.
By using the eLG platform, the time for negotiating and issuing a guarantee is reduced from nine days to one. In terms of transaction costs, some companies who use the solution claim a 200% cost reduction.
“The Letter of Guarantee is just the first service offering from BCI,” said Silawat Santivisat, BCI Chairman. ”More products will be added in the near future. The platform also sets a strong foundation for BCI to scale and expand our services offerings on top of bringing speed and efficiency to more companies.”
Italy is another country aiming to tackle banking guarantees with blockchain technology. Earlier this year, 30 Italian banks and organizations, including the Italian finance police, formed a consortium to leverage blockchain for a digital sureties project “Fideiussioni Digitali.” Italy has suffered from rampant fraud in the sureties sector, amounting to €1.6 billion ($1.76 billion) in the last four years. Blockchain may provide an answer to fraud. If blockchain is used for logging the issue of surety bonds, only authorized banks can write to the blockchain. Sureties are thereby digitized and notarized, verifying the guarantor.