The IT service provider Lufthansa Industry Solutions (LHIND) and the FinTech company TrustBills are cooperating to give the documentary letter of credit business a digital boost. LHIND provides the IoT infrastructure, TrustBills the automated payment services.
Hamburg/Norderstedt, September 3, 2020 – First, Hamburg-based FinTech TrustBills revolutionized invoice factoring, and now they want to replace another important aspect of international trade with technological innovation: letters of credit. TrustBills is establishing a digital step-by-step payment service for international trade. To realize this, the Hamburg-based company is cooperating with LHIND.
"With the support of Lufthansa Industry Solutions, we want to establish an alternative to the documentary business in foreign trade financing, but especially to letters of credit," explains Joerg Hoerster, founder and CEO of TrustBills. In foreign trade, letters of credit are understood to be an undertaking of a bank on behalf of a customer (importer) to make a payment to a third party (exporter), in return for previously defined documents - for example after receiving the customs stamp - provided that the conditions of the letter of credit are fulfilled.
And this is where LHIND's expertise with IoT devices comes into play - especially for air freight, the use of which is subject to special regulations and therefore comparatively complex to develop. Soon, it will be possible for importers and exporters to agree on a payment plan via TrustBills. Payments are then linked to certain payment triggers (e.g. distance travelled, risks overcome, compliance with temperature, air pressure, humidity and gas formation, absence of shock effects due to vibrations, and many more). Before shipment, the importer pays the agreed invoice amount into what is referred to as a "freeze" account. If, during delivery, the IoT-Device attached to the freight sends a message that the pre-defined payment conditions have been fulfilled, the payments from the payment plan are triggered and the corresponding amounts are transferred from the freeze account to the exporter's deposited bank account - fully automated and completely independent of banks. Business model calculations have shown that this process is considerably cheaper than the opening of letters of credit by banks. It is also independent of credit decisions, which are often negative due to the lack of regional coverage.
"With our experience and technical know-how, we are able to reliably record and transmit the transport conditions as well as the condition of the transported goods, even in air freight," says Bernd Appel, Managing Director of LHIND.
Customers will soon be able to rely on the agreed quality of their goods ordered abroad. This is because the performance risk data is already transmitted during transport. At the same time, TrustBills gives customers access to a fully automated payment process, provided all agreed delivery conditions are met. This creates trust and significantly accelerates payment flows. LHIND and TrustBills are planning the first showcases as early as autumn.
About Lufthansa Industry Solutions
Lufthansa Industry Solutions is a service provider for IT consulting and system integration. This Lufthansa subsidiary helps its clients with the digital transformation of their companies. Its customer base includes companies both within and outside the Lufthansa Group, as well as more than 200 companies in various lines of business. The company is based in Norderstedt and employs more than 2,100 members of staff at several branch offices in Germany, Albania, Switzerland and the USA.