Presentation at Trade Finance 2011 organised by Global Leaders Institute
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This is the presentation that I gave on November 18th in Shanghai when speaking at the Trade Finance 2011 event organised by Global Leaders Institute.
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Presentation at Trade Finance 2011 organised by Global Leaders Institute
- 1. Opening Remarks Introducing SWIFT André Casterman Head of Trade and Supply Chain, SWIFT Co-Chair "Bank Payment Obligation" Project, ICC Banking Commission Shanghai, Global Leaders Institute, Trade Finance 2011 17-18 November 2011
- 2. What is SWIFT? Community Platform Standards A A co-operative provider of The organisation highly secure financial serving the financial standardisation financial messaging body industry services
- 3. SWIFT - secure financial messaging • Established in 1973 by 239 banks in 15 countries Heritage • Developed shared messaging platform for financial transactions • Emphasis on security, reliability and availability • Serving over 9,700 financial institutions across 209 countries Reach • Payments, Securities, Foreign Exchange, Treasury and Trade • Reducing costs, improving automation, managing risk • Store and forward, file transfer, interactive query & response Technology • SWIFT strives for 99.999% availability • Industry-owned community Neutrality • Overseen by regulatory authorities
- 4. SWIFT Community Banks Corporates Payment Systems Insurance Clearing & Settlement Companies Systems Government Broker-Dealers Institutions Stock Exchanges Securities MIs Depositories Payments MIs IMIs Trustees
- 5. • 4.0 billion messages/year • Over 9700 customers • 209 countries Country Coverage • Latest Peak day: 19.1 million messages (July 2011)
- 6. SWIFT in Trade & Supply Chain Trends, Priorities, Portfolio and Bank innovations André Casterman Head of Trade and Supply Chain, SWIFT Co-Chair "Bank Payment Obligation" Project, ICC Banking Commission Shanghai, Global Leaders Institute, Trade Finance 2011 17-18 November 2011
- 7. Trends Digitization Regulation Innovation Collaboration SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 7
- 8. Priorities for SWIFT in Trade and Supply Chain • To help banks respond to the new needs of Corporates in international trade further to the move to open account • To help corporates optimise working capital management thanks to automated processing of trade transactions, whether handled on documentary or open account basis • To help e-invoicing service providers interoperate at global level and partner with banks to extend from e- invoicing to payments and supply chain finance services. SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 8
- 9. Industry standards … are those developed by international standardisation bodies • Trade Finance instruments (UCP, URDG, …) • Supply Chain Finance instrument (BPO) • MT standards • ISO 20022 registration authority • ISO 9362 BIC registration authority, … • ISO 20022 Financial Industry standards • ISO 9362 Business Identifier Code (BIC), … Industry standards are technology-neutral and industry-owned SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 9
- 10. 1 Trade Finance in a multi-bank environment FIN MT798 FileAct FIN MT7xx MT798s Documents MT798s Documents 1 2 3 Buyer Seller Buyer’s FIN MT7xx Seller’s bank(s) bank(s) 1 Buyer sends Application for a Letter of Credit to its bank either via FIN (MT798) or via FileAct (eg, documents) 2 Buyer’s bank extracts the appropriate data from the incoming Application flows (eg, MT798), putting them into an Issue of Letter of Credit and sends them to the seller’s bank over FIN (eg, MT700) 3 Seller’s bank forwards the MT700 to the Seller as an Advice of Letter of Credit using FIN (MT798) or FileAct. SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 10
- 11. 23 banks adopting SWIFT's MT798 12 from the top20 Trade banks SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 11
- 12. 2 Public Domain Industry Standards for supply chain finance Bank Payment Obligation 1 2 3 Buyer Seller Any channel / Trade Txn Any channel / Commercial any format / Matching any format / any solution Scheme any solution • Bank portal • SWIFT's Trade Services • Bank portal • SWIFT's SCORE Utility (TSU) • SWIFT's SCORE • Paper • Any inter-bank scheme • Paper based on ISO 20022 messages & rules SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 12
- 13. 18 banks adopting BPO in 2011 7 from the top20 Trade banks SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 13
- 14. SWIFT and ICC Cooperation Both the ICC Banking Commission and SWIFT believe that by working together and leveraging their respective positions across the trade finance community, the BPO will have an important role to play in supporting the development of international trade in the 21st century in addressing cost pressures in the face of increased automation and changes in the regulatory environment. SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 14
- 15. ICC BPO Working Group Corporates Banks SWIFT in Trade and Supply Chain - 18 November 2011 - GlobalBPO Working-Group: Dan Co-chairs ICC Leaders Institute Shanghai Taylor, Vice-Chair ICC Banking 15 Commission & Executive Director J.P. Morgan and André Casterman, SWIFT
- 16. The Bank Payment Obligation (BPO) A BPO is an irrevocable undertaking given by a bank to another bank that payment will be made on a specified date after successful electronic matching of data according to an industry-wide set of rules. Therefore, a BPO offers: • An assurance of payment • Risk mitigation for all parties • Possible use as collateral for finance An alternative instrument for trade settlement SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 16
- 17. BPO combines the best of both worlds Contract Contract Contract Documents Documents Buyer Seller Buyer Seller Buyer Seller Documents Application Documents Letter of Bank Open Advice Data Data Credit Payment Account Obligation Documents Data Issuance BPO BPO LC Issuing LC Advising Obligor Recipient Buyer’s Seller’s Bank Bank Bank Bank Bank Bank Payment Payment Payment Bank services based on Bank services based on Bank services limited to paper document processing electronic trade data exchange payment processing Array of risk, financing and processing services to address both cash and trade related needs SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 17
- 18. Case 1: Seller wants to get paid on time via its own bank Buyer commits to pay the seller on time via the banks I need to offer payment 2 assurance to my supplier 1 I want to be certain that I will be paid on and confirm the PO time BPO TSU Buyer Seller BPO Obligor BPO Recipient Bank Bank I can offer the I will substitute for the assurance of payment 3 creditworthiness of my 4 to my customer based customer and guarantee the on the BPO issued by payment to the seller’s bank the buyer’s bank (BPO) for a fee Payment assurance SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 18
- 19. Case 2: Buyer mitigates the supplier default risk Supplier gets pre-shipment finance or advanced payment I want my supplier to I want to increase my increase its financial 2 resilience and will help 1 liquidity either though cost-effective him get financing financing BPO TSU Buyer Seller BPO Obligor BPO Recipient Bank Bank I will offer pre-shipment I will guarantee the finance to the seller 3 payment (BPO) to the 4 with a (lower) risk on seller’s bank upon the the buyer's bank confirmed PO Payment assurance SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai Financing services 19
- 20. The leading Trade Finance vendors are accredited by SWIFT SWIFTReady for SWIFTReady SWIFTReady Corporates – Trade Finance Trade Services Utility Trade Finance • Bank-to-bank • Corporate-to-bank • ISO 20022 TSMT • Corporate-to-bank • LCs and Guarantees messages • LCs and • Bank Payment Guarantees Obligation rules Bank Corp • Open Account Bank Vendor Trade Finance Vendor Trade Finance Vendor Trade Finance Solution Solution Solution China Eximbills GTC GlobalTrade ACI Open Account Systems Corporate Manager CSI BankTrade Misys Misys Trade China Eximbills Portal Systems Enterprise Misys Trade Innovation Plus Pinnacle Synergy Trade CSI OpenTrade Solutions Services (TS) MIT CREDOC Misys Misys Trade Incorporated Multi-bank Portal Sopra Evolan IB (PSI) Corporate Site Surecomp DOKA 5, IMEX (Conformance SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai Statement) 20
- 21. Conclusion • Multi-bank in Trade Finance. Large corporates want multi-banking trade finance solutions to be based on technology-independent and industry-owned standards for both documentary and open account trade • Focus on supply chain finance / open account. Corporates are looking for more effective ways to conduct international trade, in an automated and paperless way. The Bank Payment Obligation (BPO) is a new instrument enabling banks to offer risk mitigation and financing services to buyers and sellers using electronic data flows • New rules and tools to address new needs. In view of supporting the development of international trade in the 21st century, SWIFT and the ICC Banking Commission are collaborating to establish the BPO as an accepted market practice using ISO 20022 • e-invoicing is booming. Large buyers want it, regulators mandate it; 4- corner model is inevitable as corporates select their preferred e-invoicing provider – ISO20022 is a strong interoperability enabler between service providers. SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 21