E-Guarantees: Making Trade Finance Faster and Safer

Andrzej Gliski, Member of the Management Board of Bank Millennium in Poland, explains how electronic guarantees are increasingly used in trade finance to simplify the circulation of documents, reduce processing times, provide greater transparency, and cut transaction costs.

As digitalisation and optimisation are transforming daily life and more services are delivered electronically, banks are increasingly replacing traditional paper documents with electronic files. 

Electronic guarantees, known as e-guarantees, have been used in trade finance for some time, but Bank Millennium has seen e-guarantees growing in popularity with our trade finance customers, which had one out of four guarantees issued in electronic form in 2019. With e-guarantees, a bank can deliver bank guarantees to its business customers and their counterparties faster and more safely than traditional paper bank guarantees. An electronic guarantee is issued as a PDF file with a secure qualified electronic signature placed by two authorised representatives of the bank. In legal terms, a guarantee saved in the form of an electronic file, and signed with a qualified electronic signature, is a declaration of will made in electronic form and, according to Polish law, is treated as an equivalent to a written guarantee with signatures made by hand and a stamp. 

Use of e-guarantees is increasing because of the benefits to our customers as well as their counterparties, the beneficiaries of the guarantee. The main benefits of replacing traditional paper documents with e-guarantees are faster delivery of the guarantee, lower cost with elimination of courier fees, and heightened security.

For speed and convenience, our business customers can order an e-guarantee to be issued online in the electronic banking system, in the Trade Finance module or in traditional paper format, using a bank guarantee request form. The electronically signed guarantee document will be sent by the bank via email to the customer or a counterparty, the beneficiary of the guarantee. Then the bank sends the e-guarantee directly to the beneficiary’s email address. The bank can also make the electronic guarantee available to the customer for downloading in the electronic banking system. 

Member of the Management Board, Bank Millennium Poland.

E-guarantees provide increased safety because authenticity of electronic signatures can be checked quickly and easily in Bank Millennium’s e-guarantee file in Adobe Reader. Additionally, the bank publishes a list of representatives of the bank authorised to sign e-guarantees, which is available on the bank’s website. Therefore, to confirm whether the persons who signed the e-guarantee are authorised signers and whether their certificate is valid, anyone can quickly find the information on Bank Millennium’s [secure, password-protected] website. Upon a customer’s request, the bank can also send a SWIFT message to the beneficiary’s bank with confirmation of issuing the e-guarantee. Electronic delivery of guarantees also eliminates the risk that delivery by courier will fail. 

These guarantees also provide companies the opportunity to take part in public procurement proceedings, where a condition for participation is to submit all documents in electronic form. Although e-guarantees are usually used in public procurement tenders, customers increasingly use them when securing commercial contracts, mainly because the e-guarantee can be delivered to the beneficiary in a quick and secure way.

E-guarantees issued by Bank Millennium are usually related to tenders for various types of deliveries for public administration, including IT hardware, software, office or IT accessories and materials, as well as personal or property protection services, booking and delivering travel tickets, or insurance services. 

The next step towards further digitalisation of bank guarantees will undoubtedly be the possibility to make a claim under a bank guarantee, bearing the beneficiary’s qualified electronic signature. Bank Millennium continues to see customers eager to pursue electronic solutions for banking transactions and documentation and we are committed to providing our electronic banking services effectively and securely.

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