LC MARKET

The Global Merchandise market was valued at $19.48tn in 2018, grew by 1.2% in 2019 and is anticipated to grow further. To secure and facilitate this trade value over recent decades, trade finance tools have been used.

One of the most common trade finance tools is the analogue Letter of Credit (LC). LCs are letters issued by a crediting party (most typically banks) that serves as a guarantee for payment from a buyer to a seller. Letters of credit, however, are antiquated, slow, costly, complicated and lack flexibility. For established trade businesses, this has a cumbersome effect on business operations.

The current LC systems are inconsistent, outdated, and expensive. Amongst the international trade community, there is a loud call for a simplified, lower cost solution.

Libelli is addressing the demand for a secure ecosystem for buyers, suppliers and forwarders enabling them to transact trades of any size and regardless of the origin of the participants in a trusted and innovative environment at competitive costs.

The Libelli Digital Letter of Credit platform, powered by the Linux Foundation’s HyperLedger smart contracts, will allow users to easily and seamlessly complete what would otherwise be complicated, out of reach trade processes. Through the integration of blockchain technology on a unified platform, Libelli provides flawless security, and an immutable trust that the community yearns for.

THE PROBLEM – Traditional LC

The Letter of Credit is a business contract between a buyer’s creditor and a seller that guarantees payment to the seller when the agreed upon goods are delivered.

Traditional LC application processes are thoroughly regulated and require significant effort to get approval.

While, in the past, these processes served a crucial function for ensuring trust for early international trade, there has since been little innovation. The ICC 2018 report indicates that this lack of innovation has led to significant demand for better processes and costs. There are four key problem areas where traditional LCs are failing trade markets:

Speed

Analogue LCs include an inefficient and time consuming procedure involving several steps of collection, verification and validation of documents throughout the whole processing time of the instrument. Any eventual deficiencies or amendments result in further delays or might even render the credit invalid. Including settlement of payments an overall processing time of 3 weeks is common practice. These processing times make Air, Truck, Rail, and Express shipping options entirely infeasible for analogue LC use.

Ease of use

Currently, LC processes are nuanced, and difficult to navigate. LCs usually are subject to the ICC’s UCP600 rules, which demand intensive accuracy. However, common practices and forms differ from issuer to issuer and do not reflect the needs of the individual transaction or its parties. In fact, an average of 58% of LC applications were rejected on first presentation as stated in a 2005 report, with that average increasing over time. This is a result of the manual, inflexible processes currently in use by banks and credit institutions. Additionally, if a supply vendor requires partial fulfilment from two suppliers, a way to split the LC does not exist. For all separate suppliers involved in the same trade, an entirely new LC must be applied for and processed.

Trust & Transparency

Due to a lack of transparency and inconsistent fee structures trust in banks has steadily been declining. Customer trust suffers from possible deficiencies, human error and the uncertainty if the obliged bank does actually pay.

Cost

Baseline LC costs can range from 1% to 2% for larger volumes and go up to 5% for small contract values due to the fixed costs for any transaction. The range is dependent on the size of trade, but costs are inconsistent from country to country and among institutions. Any changes to the original LC result also in additional amendment costs which further increase the overall costs.

THE SOLUTION – DIGITAL LC

Real-time processing and direct integration of service providers enables buyers and sellers to set up, adjust and execute LC agreements with greater speed and lower risk. Libelli offers an easy to use unified solution.

One unifying Platform for a global community. Distributing global access to buyers, sellers, facilitators, service providers and governments will enable greater trade opportunities.

Real time processing for all stakeholders enables coverage of all modes of transport. Entering terms

into a Smart Contract, depositing funds into Libelli’s escrow account and processing as well as storing every transaction on the blockchain will secure transparency during the entire process and guarantee trust between buyer and seller. Libelli simplifies the application process and makes it easy to perform mutual adjustments by all stakeholders involved.

Digital Letter of Credit: One unifying platform that directly integrates key service partner with a check of a box.

LIBELLI PLATFORM

Powered by smart contracts, and integrated with trade finance service providers, the Libelli Platform is a one-stop-shop for global buyers and sellers.

Uniform & Easy-to-Use

The Libelli platform combines the power and flexibility of smart contracts, regulatory thoroughness of the UCP600 guidelines, and the convenience of instant-access to trade finance service providers. The platform’s user interface is intuitive, ensuring users follow all application steps easily and thoroughly. To move forward with each step, users must enter key LC details and information. If there is missing information, users will be required to fill it in before moving to the next step in the application process. This guarantees that all LC applicants successfully submit their LC application on first presentation.

Digital Letter of Credit

Hyperledger Fabric is a Blockchain solution originally developed by the Linux Foundation for enterprise, multi- use business applications. With all trade details programmed into smart-

contract logic, multiple third parties are no longer necessary. Combined with our front-end client portal, all aspects are simplified into one, secure platform. The digital LC is the core of the Libelli Platform. It enables fair access to international buyers and sellers through unified requirements, and consistent pricing. Adjustments can be processed simply, immediately, and are reflected to all parties simultaneously.

Service Integration

Services like insurance, quality control, and factoring are integrated directly via the Libelli Platform. Libelli assures equal and transparent conditions for all stakeholders, while also eliminating error. Offering digital letters of credit through the Libelli Platform dramatically decreases the processing time and cost for buyers and sellers. Libelli expands tahe LC model beyond current market applications, enabling

time-sensitive trades. The Libelli Platform unites all trade stakeholders in one place, at the same time. Buyers, sellers, facilitators and governments are now able to issue and process digital letters of credit, issued in the form of smart contracts on the Libelli Platform. Having a digital location for buyers and sellers to meet and transact is game-changing. Throughout the trade process, updates can be made in real time on the platform. This means that opportunity cost risk caused by error and delay is minimized.

Stronghold Switzerland

Libelli’s Platform will operate solely in Switzerland. All platform users will have a place where they are subject to consistent regulation, data protection standards, legislation, and escrow terms.

Regulations & KYC

Libelli is a member of The Financial Services Standards Association (VQF), which holds the function of an official, FINMA-recognised Self-Regulatory Organisation (SRO) pursuant to the Anti-Money Laundering Act (AMLA) since 1998. In the financial sector, onboarding new clients as a regulated company is very complex. Verifying the identities and financials of our prospective clients are vital and compulsory to ensure compliance with AML (Anti-Money Laundering) legislation and Customer Due Diligence (DCC) requirements. Conducting ongoing KYC checks ensures the continued good standing of our clientele.

Legal & Jurisdiction

To avoid legal misinterpretations, all platform users will “meet” virtually in

Switzerland on the Libelli platform. This means that the transactions
will be governed entirely by Swiss
law, avoiding confusion between buyer and seller. Swiss regulatory compliance is among the most thorough in the world. Switzerland meets its commitments to WTO and bi-lateral agreements, ensuring that all trades will be assessed and executed fairly.

Banking

All escrow is executed within Switzerland by partnered escrow service providers. Their escrow gateways are built directly into
the platform, providing enhanced transparency and accessibility. Traders can rest assured that they are receiving favorable terms, and that payment will be fulfilled accurately and on time.

DATA Security

While Switzerland is not a part of the EU, data security is one of Libelli’s highest priorities. Libelli’s servers are located within Switzerland, and Libelli follows the GDPR standard for data privacy and protection. They are secured, and the best practices are in place for physical access. For instance, the servers are locked away, and under constant surveillance. Should maintenance or direct access be required, personnel (in-house or external) must go through Libelli’s standard access procedures. Personnel have thorough background checks run, including but not limited to; police checks, company background verification, submission of letters of employment, and reference checks.

BUYER

Trustin your order and supplier through BLOCKCHAIN

Programmed trust – payment to Buyer will only be released once all conditions (in form of documents) are met.
No down payments or advance payments with risk and doubts.


Speed – In time processing enables faster mode of transport (AIR FEREIGHT) for LC’s for the first time!

Eliminating the steps of collection, verification and validation by enabling the participants to upload all relevant documents of the trade to the Blockchain-based platform changes the extensive processing time to real-time.

By providing real-time processing the parties of the trade are enabled to use the security of an LC regardless of their mode of transport (in particular Air Freight).


Cost – Big savings and enabling secured payments for smaller trades

Market-leading fees will shrink barriers for developing countries, and reduce the threshold of access for smaller, time sensitive trades. Libelli offers a consistent and competitive price of between 0.4% and 0.8% of the contract value. Libelliis able to offer such competitive pricing by reducing the number of steps, and stakeholders involved in a trade. By reducing waste and fees across the application process, Libelli effectively passes all savings to the customer.

 

Ease-Of-Use

Libelli simplifies all LC processes. All ICC UCP600 guidelines are directly embedded into the smart contract. This ensures that best practices are met, and that LCs are only initiated when all guidelines are met. Instead of lengthy processes of amendment, where communication has to be passed through representative banks, buyers and sellers can mutually adjust LC details in real time if necessary. Libelli also integrates partnered service providers directly into the Platform. Libelli is, therefore, a one-stop shop for global traders, providing a greatly simplified solution to an outdated problem.

 

Trust & Transparency

Once the LC has been established, after all conditions have been met, payment is guaranteed to the seller through automated release from Libelli’s escrow account. With all major steps and financial terms being visible and accessible by all necessary stakeholders in a trade, they can inherently build on their automated trust. Every contract, transaction and detail of a digital LC issued through the Libelli Platform is recorded and archived on the Blockchain. All contract details are transparent and accessible to all relevant stakeholders at all times. Internally within buyer and sellers, this allows teams to quickly get an overview of active LCs with all relevant status information which in return gives finance departments greater access, visibility, and control of ongoing or past LCs.
No possible fraud with all documents.

Acceptance from Seller

Traditional LC’s are often not accepted anymore due to payment withholds even from Top20 banks. The Libelli platform with its Blockchain technology enables a real time trade settlement without any party to withheld payments once all conditions are met.

Security and compliance / Identification

All partners of the Libelli platform are KYC’d. All sellers are checked according to the Swiss FINMA regulations.

SELLER

Fast payment – Real time trade settlement

Eliminating the steps of collection, verification and validation by enabling the participants to upload all relevant documents of the trade to the Blockchain-based platform changes the extensive processing time to real-time. After goods are delivered to the forwarder it only takes a moment to release the funds to the seller.

No document handling

Eliminating the steps of collection, verification and validation by enabling the participants to upload all relevant documents of the trade to the Blockchain-based platform changes the extensive processing time to real-time.
No stuff needed to fulfil the obligations of a LC, as before with the traditional LC. No collection of documents and no waste of time at the collection counter of a bank!

Ease-Of-Use

Libelli simplifies all LC processes. All ICC UCP600 guidelines are directly embedded into the smart contract. This ensures that best practices are met, and that LCs are only initiated when all guidelines are met. Instead of lengthy processes of amendment, where communication has to be passed through representative banks, buyers and sellers can mutually adjust LC details in real time if necessary. For example – a change of the delivery time can be processed in the digital LC in a minute!

Trust & Transparency

Once the LC has been established, after all conditions have been met, payment is guaranteed to the seller through automated release from Libelli’s escrow account. With all major steps and financial terms being visible and accessible by all necessary stakeholders in a trade, they can inherently build on their automated trust. Every contract, transaction and detail of a digital LC issued through the Libelli Platform is recorded and archived on the Blockchain. All contract details are transparent and accessible to all relevant stakeholders at all times. Internally within buyer and sellers, this allows teams to quickly get an overview of active LCs with all relevant status information which in return gives finance departments greater access, visibility, and control of ongoing or past LCs.

Cost

No more collection fees from your bank. No fees from Libelli.

Future Services will increase your financial leeway

Multiple partial transfers of the LC amount  to sub-suppliers will be one of the next services, which will be integrated in the Libelli platform. No need to conduct tough negotiations on partial financing with the house bank. Partial transfers to suppliers in seconds solve all financing problems.

Opportunity Letter of Credit Market

Blockchain technology is accepted and utilized by global market leaders. It allows for processing speeds that can service the uncovered air freight market, which transports over US$ 6tn worth of goods p.a.

In global merchandise trade, businesses are subjected to inconsistent LC fees, legislation, and processes. Libelli is solving these issues, and unlocking opportunities within certain segments. Securing trade with vastly improved processing speeds will not only extend LC coverage to Air Freight, but also disrupt the entire market by providing better, integrated, secure, and increasingly transparent solutions at a lower cost.

Current Letter of Credit Market

Globally, 4.3 million letters of credit are used yearly, with the average value increasing from $463k to $537k between 2016 and 2017; a 15.81% increase. Out of all regions, the Asia- Pacific region uses letters of credit the most (73% of all imports and 77% of exports) and at the highest value. (ICC report , page 68). Securing a position in the Asia-Pacific region will grant Libelli a foothold in some of the world’s

fastest growing economies with a heavy reliance on letters of credit.

A growing demand

Respondents in the 2018 ICC report demonstrated a clear demand for modernized letters of credit. Addressing this demand means that smaller volume, higher frequency trades are possible, opening the door for a new wave of global trade participants.

The air freight markets are observing steady growth year over year. Despite the trade tensions of 2019, the demand for air freight continues to rise. Airline association IATA predicts a year over year freight volume increase of 2% in 2020 reaching upwards of 62.4m tonnes. Currently, air freight can not be secured by traditional, analog letters of credit, since the average processing time of LCs (18-24 days) vastly exceeds air freight delivery times (1-3

days). Providing global traders with the possibility to secure air freight delivery with digital letters of credit is a massive market opportunity. It is one of the main ways in which Libelli is positioned in the global merchandise market.

Why now?

Blockchain was first developed over 10 years ago. At the time, it wasn’t ready for market application. Since then, market leaders have adopted blockchain technology, driving awareness and adoption. The Libelli solution, powered by Hyperledger Fabric, is arriving at the perfect time to reinvigorate a market that has been stagnating since 2013.

Come and Work with Us

Contact Info

  • Libelli AGRuessenstr 6Baar/ZugSwitzerland 6340
  • +41779510914
  • Libelli Ltd 7A China Overseas Building 139
    Hennessy Rd Wan Chai, Hong Kong
  • +852 8120 5400
  • info@libelli.hk