Trade /Delivery versus payment (DVP)
Bohem in Payment on Delivery. DVP is also known as delivery against payment (DAP), delivery against cash (DAC) and cash/payment on delivery.
Many trade partners are forced to settle trades based on trust, trust which they actually don’t have, given experienced
- One party become insolvent
- Low payment discipline
- Liquidity locked in account receivables
- Low trust in counter party
An automated “payment upon delivery” process, via an escrow account used for transaction settlement between the trade parties. A logistics company can be added for independent cargo status updates.
- Buyer pays/confirms purchase price with escrow bank
- Seller initiates shipment of cargo upon confirmation of escrow
- Confirmation of delivery (hand over) of cargo releases payment to seller
- The escrow framework can be enhanced with a third party logistics company and different payment methods, e.g. installments
- Buyer and seller agree transaction and settlement via Secure Payment on Delivery
- A. Buyer pays purchase amount (or installment) into escrow
B. Escrow service company confirms payment into escrow
- Seller initiates delivery of goods/service (e.g. via agreed logistics company)
- Buyer or logistics company confirm delivery (hand over)
- Escrow service company releases payment to seller
Smart contracts for Delivery versus Payment could enable the consistent and coherent implementation of rights and obligations that will increase buyers/investors confidence and reduce compliance costs in the market. It is also improving operational efficiency, reducing settlement risks and thereby reducing underlying risk exposures.