A Letter of Credit — also known as a Documentary Credit — is a widely used financial instrument in international trade. It’s issued by a bank on behalf of the buyer (applicant) and guarantees payment to the seller (beneficiary), provided the seller presents documents that comply with the terms of the LC.
For both parties, an LC reduces payment risk: the buyer doesn’t pay until conditions are met, and the seller has assurance that the bank will pay as long as the documentation is in order. That’s why LCs are a preferred method for high-value or high-risk transactions across borders.
Most LCs today are already issued and advised electronically, often via SWIFT. What remains heavily paper-based, however, are the documents required under the LC — such as bills of lading, invoices, and certificates. When these underlying documents are digitised using compliant formats (like MLETR-based digital originals), the entire process becomes faster, more secure, and less error-prone.
Digitising these documents doesn’t change the structure of the LC — but it does unlock significant efficiency, especially for banks managing volumes at scale.