Bank Guarantees: Digitized
While crucial to securing contracts and transactions, bank guarantees have also traditionally guaranteed frustration and inconvenience for everyone. Thankfully, blockchain powered digital bank guarantees are now here, and in a big way. While the technology has been around for years, it has only recently gained mainstream traction, particularly as a major consortium of Australian banks have officially adopted it as part of their workflows.
How It Works
Blockchain is the decentralized ledger tech behind cryptocurrencies. Apart from simple transactions, it is also capable of smart contracts, which are designed to automatically execute, control or document legally relevant events and actions according to the terms of a contract or agreement. Thus, it is possible to use the technology to create, issue, execute and track bank guarantees 100% digitally and virtually instantaneously, if all conditions are met. Euro Exim Bank has long since committed to blockchain-powered global payment settlements using RippleNet.
Security & Transparency
Blockchain powered digital bank guarantees are extremely secure and minimize the risk of fraud and forgery. Records are stored in the blockchain, which means provable immutability. The entire process of issuance, execution and tracking is highly transparent and extremely simple. Digital bank guarantees also generally provide multidevice support, which means ease of access from any device, resulting in improved inclusivity.
Ease & Convenience
As the entire workflow for blockchain powered bank guarantees is digital, the process is simplified for both banks and customers. There is no longer a need for physical presence, signatures or documentation, allowing banks to issue these instruments seamlessly and speedily.
Digital bank guarantees can potentially be cheaper than their traditional counterparts simply due to them being less cumbersome, time consuming and expensive to issue. Of course, the real cost efficiencies will only emerge upon true widespread acceptance.
Benefits for International Trade Settlements
Bank guarantees are used in many international trade settlements and are often a sore point, causing delays and other difficulties for customers. With this new technology, and particularly its emerging mainstream acceptance, there is now an easier, cheaper, more reliable and seamless mechanism for parties to settle international trade transactions.