When will the trade finance world see the future? [Opinion]

Companies are moving into open account trade relations. Banks’ role is limited to money transfer and fees made, in letter of credit methods are now gone. Apparently with the Bank Payments Obligation, SWIFT has once again thought to have found a cure (after its failed TSU product) to recapture the dying trade income.

[This is a personal opinion by eFinans employee Ilke Altin and does not necessarily reflect official company opinion]

Bank payments obligation (“BPO”) is a class of settlement solution in international supply chain finance. The solution is promoted by the system carrier SWIFT and the International Chamber of Commerce (ICC) Banking Commission as a means to move away from L/C schemes toward “support[ing] the development of a globally accepted standardised environment and establishment of the BPO as a neutral industry-wide practice”.

The basic concept for the TSU was a matching system for trade documents which is designed to allow banks to provide funding at various stages throughout the physical supply chain. This could be used for letter of credit business or open account transactions. The service is available between few banks which adopted TSU and is designed to allow these banks to integrate more effectively with their Corporate Customers, and their Suppliers. BPO system is none other than the failed TSU reintroduced with XML coding.

BPO is a data matching tool between banks. The system fails to observe paperless trade and risk mitigation.

How would BPO work?

• Documents: Usual set, invoices, bills of lading, other certification.
• Are documents checked for authenticity, any e-signatures, etc.? No
• Who supplies the data? The companies.
• How will the data matching be captured? Companies will e-mail scanned copies. Operations will enter data into banking core system and integrate with SWIFT BPO system on both sides.
• Are they tax compliant invoices? Issue unclear
• Does the system use e-invoices and has the ability to integrate with e-invoicing service providers? No
• Why not get FIATA documents in XML, why not collaborate with e-invoicing companies or e-signature companies? No answer

Conclusion
After TSU, the banking community once again wants to dye the old car and sell it off as modern Retro design. No, thank you.