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In the previous video, Media Mundo explained to Nick about various payment methods, including the letter of credit (LC). LC is an important method involving the buyer's bank, Nicos bank, and the seller. Payment is made when the seller submits shipment documents to her bank. LC protects the seller from payment default and the buyer from payment obligation until goods are shipped. Parties involved in LC include the buyer (applicant), the buyer's bank (issuing bank), the seller (beneficiary), and the advising bank. The LC process ensures a secure transaction for both parties.