On July 19, 2017, Kasikornbank (KBank) introduced a blockchain-backed Letter of Guarantee (LG) service called "Enterprise Letter of Guarantee on Blockchain" (ELGB). The blockchain solution is expected to offer specific benefits relating to security, speed, price, efficiency, centralized databases, and new business opportunities.
Four state enterprises and private businesses, Metropolitan Electricity Authority, Provincial Electricity Authority, PTT Global Chemical PCL, and PTT Polymer Marketing Co., Ltd., worked with KBank to develop the innovation, which was tested in the Bank of Thailand’s regulatory sandbox and and developed to address an expected increase in LG issuance through electronic channels. These large institutions will integrate LGs electronically to satisfy the needs of multiple trading partners, taking advantage of the security and immutability offered by blockchain technology.
In the announcement, KBank President, Mr. Pipit Aneaknithi, extolled the virtues of blockchain technology as applied to the business sector, saying that the technology creates highly secure networks for document filing and retrieval.
The Thai economy relies on LGs to ensure reliability among trading partners, and as such, a great number of LGs are issued. Due to the high volume, leveraging blockchain technology to ease the load upon issuing agencies is a logical step.
KBank aspires to establish a new business standard, and, with that in mind, developed its blockchain network to streamline the bank's LG processes and procedures.
Aneaknithi projects that the future market of LG in Thailand may be worth upwards of 1.35 trillion Baht (approximately $40 billion) in 2017, representing an 8 percent increase from the prior year. KBank will issue LGs worth 330 billion Baht, a market share of 25 percent, of which 80 percent will be issued at its branches. The remaining 20 percent will go through electronic channels. KBank expects issuances through electronic channels to increase to 35 percent by the end of 2018, and that blockchain technology will be used to process 5 percent of that.
With the introduction of the ELGB in Thailand’s financial sector, its success could spell further adoption across the globe.