Letters of Credit
A Letters of Credit (LC) is a financial instrument used in international trade to provide a guarantee of payment from a buyer's bank to a seller, ensuring that the seller receives payment as long as specified conditions are met. It acts as a secure method to mitigate risks for both parties in cross-border transactions by involving banks as intermediaries. This concept is crucial in global commerce, particularly for developers working on fintech, banking, or supply chain management systems.
Developers should learn about Letters of Credit when building or integrating systems for international trade, banking, or logistics platforms, as it's essential for automating payment processes and ensuring compliance with trade regulations. It's used in scenarios like e-commerce platforms handling cross-border sales, financial software for banks, and ERP systems managing supply chains, where secure and reliable payment mechanisms are required to reduce transaction risks.