Increase Commission Revenues on Your Bank’s Letter of Credit Operations

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Share Icon Share 21 Sep 2023
Authors: Hümay Ilgaz, Zeynep Şen

A substantial portion of the foreign trade revenues generated by banking industry originates from letters of credit operations. Despite their significance, these processes are notoriously challenging due to their long-life cycles and the involvement of large number of stakeholders. Ensuring operational efficiency is vital in maintaining customer satisfaction and overcoming these difficulties. Solutions that could correctly guide the user and accelerate the operations can provide banks with a substantial competitive edge.

For one of the leading banks in Turkey, we took over the challenge of optimizing the Export Letter of Credit process and found success by designing and developing new screens and flows that integrates with pricing system and automatic commission collection. The most pervasive issue faced in previous operations was the excessive workload of users leading to incorrect commission collection or even forgotten collections entirely.

Our efforts resulted in a remarkable increase of over 60% in the commission revenue and a saving of 27.000 work hours of the valuable workforce.


The initial estimate for the income loss rate was around 15%. Our project aimed to not only validate this figure but also minimize the commission income loss.

Our analysis uncovered that Letter of Credit transactions was conducted through 7 separate screens and required handovers between multiple users, leading to concerns in the governance of the process. Furthermore, the absence of integration with the Bank’s pricing system resulted in inconsistent commission charges with many users unaware of the lower and upper limits. Some collections fell below the lower commission limit, causing lost revenue for the bank, while others exceeded the upper limit, putting the bank at risk legal penalties.

Despite the complexities in the commission collection, collections were being tracked manually. This led to difficulties in managing additional commissions that arose from changes in the amount of the letter or the addition of new services. The manual process also made it hard to keep track of these commissions, leading to missed collection.

Another area that required standardization and optimization was the documentation process as the existing documents had many obsolete fields. What is more, there was the risk of losing track of the documents. No document management solution was in place and documents were passed through e-mails, with some even lacking a wet signature.

Given these issues, we concluded that the bank needed a complete overhaul of their processes to prevent loss of commission income.

This process led to a new solution that offers traceability, a robust document management system, proper accounting, and a full suite of reporting functionalities throughout the entire Letter of Credit lifecycle


To optimize the export Letter of Credit process for one of the leading banks in Turkey, we first standardized all the commissions across the entire bank by defining them in the Commission Application, accessible to all the relevant business units. The legal regulations were adhered to for the upper commission limit, and guidance from the bank’s commercial product unit was used for the lower limit. This helped to mitigate the risk of incurring legal penalties or missing out on potential commissions.

Next, we optimized the commission collection process by consulting with various business divisions to determine the commission collection stages. We designed a pricing user interface that displays all the commissions within a specific Letter of Credit process. This user interface includes information such as the commission name, collection stage, party to collect from, amount/rate, and currency. Within the screen, users can view the customer accounts, filtered by required currencies, and display up-to-date account balance information to make informed commission collection decisions. By making the customer account selection mandatory and saving it in the system, user errors during collections are eliminated and the commissions are automatically collected at the relevant letter of credit stages. Controls were also added to the commission limit and approval flows to avoid issues like charging above the upper limits, which could result in penalties, or below the bank’s lower limit, which could yield to lower income. Having completed them all, we integrated this user interface into the Letter of Credits process flow to eliminate the email loops between branches and the operation center.

We utilized a low-code platform to streamline the development of the Letter of Credits screens and flows, as well as the commission collection integrations, thereby reducing the time to value. Throughout the process, the commission amounts are calculated automatically, eliminating the risk of user errors during calculation and repetitive collection.

The process has been re-engineered to incorporate a flexible re-pricing capability for cases of transaction modifications, commission re-calculations, and validations. For instance, if the amount of a commission changed after it is collected, the system automatically creates a new line in the commission table with the updated commission amount, collection party, and collection stage information.

An approval mechanism is added at various stages of the process to ensure effective communication between customers and the corresponding bank, and to warrant the management’s consent. The solution also included a notification engine to remind the relevant parties of deadlines and to provide traceability of the approvals. A dashboard further enhances this functionality by providing real-time insights into commissions, amounts, collection parties, and the collection stages.

The outdated manual creation of documents such as the Cover Letter, Document of Registrations, Document of Notices, and Confirmations has been replaced with an automated system that prepares the necessary documents at the appropriate stages of the process. The requirement for wet signatures is revisited and document designs are optimized to save more time for the workforce. Finally, all the documents produced during the process are integrated to the Bank’s central document management system, allowing for full traceability.


Through the digital transformation initiative led by DefineX, the Bank’s Letter of Credit process is revolutionized. All aspects of the process are now brought into a single digital platform, complete with automated notification systems, reporting, and seamless integration with the commission collection and document management system.

As a result of these numerous, yet impactful, improvements,

  • The export Letter of Credit Commission revenues saw an impressive 60% increase, surpassing the initial expectations.
  • By optimizing processes through automation of collection transactions, creation of notification letters, file closing, cost tracking, and sending notifications, the workforce saved approximately 27,000 hours per year. The integration of Letter of Credit documents into the Bank’s document management system also saved time and improved traceability throughout the long lifespan of the process. This freed up valuable time for other crucial tasks within the department.
  • The risk of incurring penalties is effectively eliminated through strict adherence to the announced upper commission limits.
Hümay Ilgaz All Insights
Zeynep Şen All Insights