Loan guarantees typically include a lot of paper documents. The British bank Standard Chartered wants to get rid of the paper by testing a way of putting loan guarantees on a blockchain, it said in a press release. For this pilot program the bank is working with the finance arm of Siemens, and TradeIX, a digital trade provider.
The companies said the pilot started in March and is expected to be completed later this year. It involves bank clients only in Asia, Africa and the Middle East, said Samuel Mathew, the global head of trade products at Standard Chartered.
Unlike a letter of credit, which involves multiple parties, performance details and a lot of documents, a commercial bank guarantee is a much simpler instrument to digitize, according to the release. Digitizing the process, from initiation of the bank guarantee to the claim handling, would make things easier for everyone.