Bank of Boston Corp. has developed software that lets corporate trading partners exchange letter-of-credit documentation electronically.

Bank of Boston's service, called Trade Key for Export, allows corporate customers to dial in via modem to an electronic mailbox for information on trading activity.

A letter of credit is a bank-issued instrument that guarantees payment for certain transactions. Its pricing varies little from bank to bank, said Charles Darwall, a senior product manager with the $45.3 billion-asset bank. Bank of Boston is the nation's sixth-largest player in the letter-of- credit business.

In trade finance, the instruments are bought by importers and exporters who want extra assurance that goods will be delivered as specified under the original agreement.

The business of providing letters of credit has become increasingly competitive in recent years, which is why many large banks are attempting to differentiate themselves through enhanced services.

"The letter-of-credit business has a reputation in the world of being excessively paper intensive," Mr. Darwall said.

The new software is part of Bank of Boston's effort to help its clients by reducing the amount of paperwork involved in letters of credit.

In April, Chemical Banking Corp. was among the first to roll out a similar initiation and information service.

Companies that export goods across borders often request importers to send copies of the trade documents. Normally, banks would simply fax or mail copies of these documents to their corporate customers, Mr. Darwall said.

The new software electronically transmits documents from the bank to the corporate customer, and generates cover letters for all the documents sent.

It also creates management reports, which allow corporations to analyze letter of credit activity. These reports can be exported into Lotus' Excel spreadsheets or other formats. This reduces the amount of paper that banks and corporations contend with.

"This offers the customer reduced mail float and more timely receipt of these sensitive documents," Mr. Darwall said. "People don't have to rekey information from scratch."

He said the software is integrated with the bank's mainframe, so when the bank receives messages over the Swift system, run by the Society for Worldwide Interbank Financial Telecommunications, the information gets routed through the bank's letter-of-credit system and then again into the Trade Key software system.

Competition in the letter-of-credit business is particularly intense among the top players.

The revenues generated depend on volume. But new issuers are shrinking from traditional markets, because many corporate trading partnerships have matured and are maintaining ongoing relationships and "open accounts" with one another. This eliminates in many cases the need for credit enhancement instruments.

This decline however is more than offset by the growing U.S. trade exports to companies in emerging markets like Latin America, Asia, and Eastern Europe, according to analysts with Salomon Brothers, New York.

"Exports are the new frontier in the letter of credit business," Mr. Darwall said.

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