A letter of credit is a document issued mostly by a financial institution which usually provides an irrevocable payment undertaking (it can also be revocable, confirmed, unconfirmed, transferable or others e.g. back to back: revolving but is most commonly irrevocable/confirmed) to a beneficiary against complying documents as stated in the Letter of Credit.
In 1150, the Knights Templar began generating letters of credit for pilgrims journeying to the Holy Land: pilgrims deposited their valuables with a local Templar preceptory before embarking, received an encrypted document indicating the value of their deposit, then used that document upon arrival in the Holy Land to retrieve their funds.
Notes and references
- Wasserman, James. An Illustrated History of the Knights Templar. Rochester, Vermont: Destiny Books, 2006.