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TRANSCRIPT
Trade Digitization and CAT 7 Enhancements
Richa MukherjeeDirector, Trade and Treasury
SWIFT
Digitising Trade Finance
&
MT Category 7xx Enhancements Trade
Finance using MT 798
BAFT India Workshop, Chennai
August 1st, 2016
Agenda
3. Digitizing trade finance using BPO- ISO 20022
4. Q & A
2. Digitizing trade finance using MT 798
3. MT Category 7xx Enhancements
1. Introduction
SWIFT scrl is the
global provider
of secure
financial
messaging
services
2
40 years serving
the global
financial
community
23 years serving
India’s financial
community
Now serving
India’s domestic
financial markets
70s
8
0s
9
0s
0
0s
1
0s1973: Swift is born
1976: First operating centre opens
1977: SWIFT goes live – first message
sent
1979: North America connects to SWIFT
1980: First Asian countries connect to
SWIFT
1986: SWIFT launches value-added
services
1987: SWIFT launches securities services
1992: Interbank File Transfer goes live
1994: Customer support centre opens in Hong Kong
1997: SWIFT technology centre opens in the United
States
2001: SWIFTNet goes live
2004: ISO 20022 introduction
2008: SWIFT launches Alliance Lite
2009: SWIFT launches Innotribe
2012: SWIFT India joint venture
established
2015: SWIFT India approved to
provide domestic messaging
services, and platform is live
3
SWIFT scrl is
overseen by the
central banks of
G10 countries
and
central banks of
an Extended
Oversight Group
including the
Reserve Bank of
India
G10
Canada
Belgium
ECB
France
Germany
Italy
Japan
The
Netherlands
United
Kingdom
United States
Switzerland
Sweden
Extended
oversight
Australia
China
Hong Kong
India
Korea
Russia
Saudi Arabia
Singapore
South Africa
Turkey
4
SWIFT scrl
in figures
5+billionFIN messages per year (2013)
10,500+SWIFT users
200+Countries and territories
22.68 millionFIN messages peak day (2013)
10.4%Increase in FIN traffic (2013)
5
Customers can
re-use their existing
SWIFT gateways to
communicate with
foreign and domestic
counterparties
8
pp
Provides cross-border
messaging services,
interfaces, implementation
services and support
Provides domestic
messaging services
SWIFT India
provides financial
services to India’s
domestic markets
A joint venture by the
community, for the
community
Axis Bank
Bank of Baroda
Bank of India
Canara Bank
HDFC Bank
ICICI Bank
Punjab National Bank
SWIFT scrl
State Bank of India
Union Bank of India
(in alphabetical order)
9
Comprehensive, best in class
messaging services
Foundation for communicatio
n with all financial markets
At a fair and competitive
price in rupees
Governed by the Indian financial
community
Meeting RBI objectives for (i) competition; (ii) reduced concentration
risks; and (iii) international best practices.
SWIFT India values
10
Excellence Community Innovation
11
SWIFT India is
approved by the
Reserve Bank of
India to provide
domestic financial
messaging services
across all financial
markets
Live
services
Next Gen RTGS (Pilot in
progress)
NACH (Pilot in progress)
Interbank Trade Finance
Interbank Treasury
Corporate-to-Bank
(Payments, Cash
Management, Trade Finance
and Treasury)
Planned
services
NEFT, IMPS, ABPS, MMID
CCIL FX matching,
confirmations and reporting
Stock Exchanges
CSDs
Post trade securities
settlement
12
• MT 798• Facilitating multi-banking solutions in
documentary trade finance
13
Regulators and industry associations are promoting Trade Digitisation too
INSTRUMENTSWIFT INDUSTRY
STANDARDSWIFT MESSAGING
SERVICE
INDUSTRY LEGAL RULES AND
MARKET PRACTICE
Letter of Credit (LC)
MT 7xxMT 798
FINUCP 600 / eUCP
Bank Payment Obligation (BPO)
ISO 20022 tsmtTrade Services
Utility URBPO 750
Demand Guarantee
MT 7xxMT 798
FINURDG 758
Single European Payments Area
Credit Transfer / Direct Debit
(SEPA)
ISO 20022 pain pacs camt
FileAct
Cross-border Payment
MT 103MT 9xx
FINSWIFT FIN service description
14
• Challenges and drivers
15
Corporate challenges with traditional trade instruments (1/2)
Export documentary credit
• Difficult to manage advices of export L/Cs and amendments received from multiple banks in paper form and via different banks portals
• Internally, difficult to collaborate between treasury and various business units on L/C allocation and preparation of documents
• Lack of visibility of each step in the transaction process
• Too many discrepancies, slowing down document compliance checking
• Delayed receipt of payment
Import documentary credit
• Treasury lacks visibility to the allocation of credit facilities to business units for import L/C issuance
• Lack of standardised approval process for import L/C issuance
• Delays in import L/C issuance
• No electronic global data base of import L/Cs for real time reporting of outstanding L/Cs. Ideally by Business Unit, Bank, Product, Counter Party
• Difficult to link import L/Cs with export L/Cs for back to back transactions
• Challenging to set up permanent and transactional alarms on key L/C dates
16
Corporate challenges with traditional trade instruments (2/2)
Standby L/C and Demand Guarantee
• Management is decentralized and handled independently by each subsidiary
• Difficult for central treasury to monitor the terms and the availability of Standby L/C and Guarantee facilities and improve the diversification of business allocation between the banks
• How to offer flexibility for subsidiaries but enforce standard policies moving forward?
• Reconciliation of related data and settlement of fees is time consuming and prone to errors
• Complex documentation management will result in increased charges
• Transparency is not optimal and will result in differences between the banks‘ and treasury‘s records
• With different technology solutions, more challenging to on-board subsidiaries and banks
17
Drivers for Corporates to adopt multi-banking trade finance solutions
Digitise and automate
Consolidateinformation
Standardise bank interface
Acceleratetrade
processing to be more
competitive
Improveinternal
workflow and control
18
• Industry standards
19
Multi-banking trade finance implementations on SWIFT
• ICC Banking Commission's rulesRules
•MT 798 standards
• ISO 20022 standardsMessages
•Business Identifier Code for banks and corporates (BIC or ISO 9362)Identity
•SWIFT Corporate Environment (SCORE)Channel
•Certified vendors applications
• In-house developmentSolutions
20
Industry standards for L/Cs and Guarantees
FIN MT 798
FIN MT 7xx
Buyer’s
bank(s)
Seller
Seller’s
bank(s)
Buyer
1 2 3
SWIFT's MT 7xx are industry owned and
technology neutral standards in support of ICC's
rules for L/Cs, Standby L/Cs and Demand
Guarantees
MT
798Documents MT
798Documents
UCP 600
URDG 758
ISP98
FileAct
MT
7XX
1
MT 798 adoption
Case studies and recent adoption newsDate Recent news
Feb 2016
Kongsberg Selects GTC's Multi-bank Trade Finance Platform and SWIFT
Oct 2015
Deutsche Bank: SWIFT MT798 –Global integrated solution for Trade Finance
Sep 2015
SWIFT MT798 supported by IBAS
Sep 2015
GlobalTrade Corporation (GTC) integrates SWIFT’s Alliance Lite2 with its Multi-bank Trade Finance Platform
May 2015
Nokia selects GTC's multi-bank trade finance platform and SWIFT MT798 messages for their trade flows
Dec 2014
BillerudKorsnas selects GTC’s @GlobalTrade Export Document Credit System to manage it s global LC flows
Case studies
Volvo: Trade Finance Development
Seaboard, GTC & Alliance Lite2: Automating processing of Export Documentary Credits
Safran, Credit Agricole-CIB and GlobalTradeCorporation
Alcatel-Lucent and Credit Agricole-CIB: Automating Demand Guarantees in a multi-bank environment using MT798
Banks adopting the MT 798 standards
Including 13 of the top20 trade banks (*)
(*) ranking based on Cat 7
traffic
and more …
46Banking groups
live
or implementing
24
Issues for banks with non standardised multi-bank options
Scenarios:
Major issuesfor banks:
Corporate using a vendor platformforcing banks to
adopt proprietaryformats, security
and rules
Corporate re-using its FI BIC and the MT7xx
messages on the bank-to-bank FIN
service
Corporate using a vendor BIC and
the MT798 standards on the bank-to-bank FIN
service
Corporate using MT 798 standards with its
own BIC in SCORE
Increasedvendor and
technicalcosts
Additional fees for banks to pay to
the vendor; additional IT integration
No fee for banks to re-use SWIFT and SCORE for
trade finance
Increasedoperational
costs
Additional vendor-specific
operationalprocesses for
limited number of clients
Additionalcustomer-specific
operationalpractices for
banks to develop
Single trade-specificprocess for all multi-bank
corporates
Increasedlegal
complexityand costs
Parties need to develop vendor-
specificcontractual
arrangements
Parties need to develop
corporate-specificcontractual
arrangements
Parties need to develop vendor-
specific contractual
arrangements
Standardised SCOREagreement for cash and
trade
Increased KYC risks
Depends on vendor-owned
legal frameworks
Lack of visibilityon corporate
identity, resultingwith likely KYC
Lack of full visibility to end-
corporate identity, resulting with
Standardised SWIFTregistration for corporates
and re-use of BIC by
25
Issues for corporates with non standardised multi-bank optionsScenarios:
Major issuesfor
corporates:
Corporate using a vendor platformforcing banks to
adopt proprietaryformats, security
and rules
Corporate re-usingits FI BIC and theMT7xx messages on the bank-to-bank FIN service
Corporate using a vendor BIC and
the MT798 standards on the bank-to-bank FIN
service
Corporate using MT 798 standards with its
own BIC in SCORE
Increasedvendor and
technicalcosts
Need for multiple solutions when
any of the banksrequired do not
support the vendor platform
Proprietary development: so
packagedsolutions and costs cannot be shared
Re-use SWIFT connectivity in use for
treasury and cash management
Not followingindustry
standards and best practices
Dependency on single vendorsolution: less
competition and technical lock-in
Not able to benefitfrom full MT798
functionality
Corporate does not benefit from
SWIFT's FIN Responsibility and Liability
(R&L)
Single process with all banking partners
Increasedlegal
complexityand costs
Parties need to develop vendor-
specificcontractual
arrangements
Parties need to develop
corporate-specificcontractual
arrangements
Corporate cannot benefit from standardised
legal documentation
Standardised SCOREagreement for cash and
trade
Increased KYC risks
Depends on vendor-owned
legal frameworks
Lack of visibility on corporate identity,
resulting with
Lack of full visibility to corporate
Standardised SWIFTregistration for
26
• Scope of MT 798 standards
27
A P P L I C A T I O NMT 798<770>
MT 798<700>
MT 798<701>
I S S U A N C E N O T I F I C A T I O N
MT 798<771>
MT 798<700>
MT 798<701>
A M E N D M E N T R E Q U E S TMT 798<772>
MT 798<707>
A M E N D M E N T N O T I F I C A T I O NMT 798<773>
MT 798<707>
A M E N D M E N T A C C E P T A N C E N O T I F I C A T I O NMT 798<736>
D I S C R E P A N C Y A D V I C EMT 798<748>
MT 798<750>
D I S C R E P A N C Y A D V I C E R E S P O N S E
C O M P L I A N C E A D V I C E N O T I F I C A T I O N
D I S C H A R G E A D V I C E N O T I F I C A T I O N
R E F U S A L A D V I C E N O T I F I C A T I O N
P A Y M E N T A D V I C E N O T I F I C A T I O N
I M P O R T P A Y M E N T S E T T L E M E N T A D V I C E
MT 798<753>
MT 798<754>
MT 798<731>
MT 798<732>
MT 798<749>
MT 798<733>
MT 798<734>
MT 798<755>
MT 798<756>
MT 798<757>
Corporate-to-
Bank
Import
Documentar
y Credits
Bank-to-
Corporate
Applicant Bank
28
A M E N D M E N T A D V I C E
A M E N D M E N T A C C E P T / R E F U S A L A D V I C E
A U T H O R I S A T I ON A D V I C E N O T I F I CA T I O N
C O M P L I A N C E A D V I C E N O T I F I C A T I O N
D I S C H A R G E A D V I C E N O T I F I C A T I O N
R E F U S A L A D V I C E N O T I F I C A T I O N
P A Y M E N T A D V I C E N O T I F I C A T I O N
T R A N S F E R R E Q U E S T
T R A N S F E R A D V I C E
E X P O R T P A Y M E N T S E T T L E M E N T A D V I C E
C R E D I T A D V I C E
MT 798<774>
MT 798<700>
MT 798<701>
MT 798<776>
MT 798<707>
MT 798<735>
T H I R D B A N K A D V I C E
MT 798<780>
MT 798<710>
MT 798<711>
P R E S E N T A T I O N R E S P O N S E MT 798<737>
MT 798<751>
MT 798<752>
MT 798<753>
MT 798<754>
MT 798<731>
MT 798<732>
MT 798<733>
MT 798<734>
MT 798<755>
MT 798<756>
MT 798<722>
MT 798<758>
MT 798<782>
MT 798<720>
MT 798<721>
Export
Documentar
y Credits
Corporate-to-
BankBank-to-
Corporate
Bank Beneficiary
29
Corporate-to-
Bank
Guarantees /
Standby
Letters of
Credit
Bank-to-
Corporate
Applicant Bank
E X T E N D / P A Y R E S P O N S E
A P P L I C A T I O N
A M E N D M E N T N O T I F I C A T I O N
E X T E N D / P A Y Q U E R Y
C L A I M N O T I F I C A T I O N
C L A I M / C H A R G E S S E T T L E M E N T
R E D U C T I O N / R E L E A S E A D V I C E
N O T I F I C A T I O N
A M E N D M E N T R E Q U E S T
R E D U C T I O N / R E L E A S E R E Q U E S T
MT 798<761 or
784 >
MT 798<760>
MT 798<762 or
785 >
MT 798<760>
MT 798<763 or
786 >
MT 798<767>
MT 798<764 or
787 >
MT 798<767>
MT 798<777>
MT 798<778>
MT 798<779>
MT 798<781>
MT 798<783>
MT 798<766 >
MT 798<769>
30
Corporate-to-
BankBank-to-
Corporate
Bank Beneficiary
Guarantees /
Standby
Letters of
Credit
A D V I C E
A M E N D M E N T A D V I C E
P A Y M E N T C L A I M
C L A I M A C K N O W L E D G E M E N T
MT 798<745 or
746 >
MT 798<760>
MT 798<743 or
744 >
MT 798<767>
MT 798<712>
MT 798<714>
31
Corporate-to-
BankBank-to-
Corporate
Bank Beneficiary
Corporate-to-
BankBank-to-
Corporate
Applicant Bank
C H A R G E S S E T T L E M E N T N O T I CE MT 798<793>
MT 798<790>
F R E E F O R M A T
F R E E F O R M AT
C H A R G E S S E T T L E M E N T R E Q U E S T MT 798<794>
MT 798<791>
MT 798<788>
MT 798<799>
MT 798<789>
MT 798<799>
C H A R G E S S E T T L E M E N T N O T I CE MT 798<793>
MT 798<790>
C H A R G E S S E T T L E M E N T R E Q U E S T
F R E E F O R M AT
F R E E F O R M A T
MT 798<794>
MT 798<791>
MT 798<789>
MT 798<799>
MT 798<788>
MT 798<799>
Common
Group
32
• Benefits and next steps
33
Win-win benefits for corporates and banks
BenefitsCorporat
esBanks
Consolidated Trade finance positions and increased visibility
Single multi-bank & multi-business channel
Dematerialization & standardization
Re-use bank-to-bank FIN MT7xx data fields with Corporates
Re-use of FileAct for any needed documentsto be included in the information flows
Overall cost reduction
Improved straight-through processing end-to-end Improved overall transaction time
Only one interface development to integrate to Bank back office (no need for vendor-specific interfaces, procedures, contracts, formats)
Corporates and banks can make independent decisionson technical platforms and implementations
34
• Bank Payment ObligationA new payment method
URBPO
Confidential to participants only
ICC Uniform Rules for
Bank Payment
Obligations
Designed to complement and not
to replace existing solutions
A BPO is an irrevocable undertaking given by
one bank to another bank that payment will be
made on a specified date after a successful
electronic matching of data according to an
industry-wide set of rules.
35
Adoption of ISO 20022 for BPO in Trade Finance
19Banking groups live on BPO / TSU
25Banking groups testing BPO on TSU
189Banks (BIC8) reachable on TSU
55+Corporate relationships live on BPO
80Banking groups reachable on TSU
18 / 2018 of the top20 trade banks (*) are reachable on TSU to process BPOs
68%68% of the top50 trade banks (*) are reachable on TSU to process BPOs
50Countries reachable on TSU
(*) ranking based on Cat 7
traffic
Chemicals
General RetailersPersonal Goods
Mining
Technology Hardware & Equipment
Automobiles & Parts
Food Producers
ISO 20022 for BPO brings value in various industries
19 banking groups live on ISO 20022 for the BPO
Including 6 of the top15 trade banks (*)
(*) ranking based on Cat 7
traffic
Banking groups testing BPO on TSU
AM
Bank of America
Citi
J.P. Morgan
AP
Bank Mandiri
HSBC
Kasikornbank
Mizuho
National Australia Bank
Sumitomo Mitsui Banking Corp. (SMBC)
EMEA
Banca popolare dell'EmiliaRomagna
Banco Santander
Bank al Etihad
Crédit Agricole CIB
Danske Bank
Deutsche Bank
Finansbank
Garanti Bank
ING
la Caixa
Rand Merchant Bank
Samba Financial Group
Standard Bank of South Africa
The Royal Bank of Scotland
UBS
Non-live banks with 1 or more established
baseline(s) in test in the last 12 months
BPO wins Payment Awards 2015
B2B Payments
Innovation of the Year
Read full article
ISO 20022 for BPO adoption
Case studies and recent adoption news
Date Recent news
Nov 2015
Toyota’s Middle East car dealer eyes more BPOs
Oct 2015
BCG Paper: Embracing Digital in Trade Finance
Aug 2015
Standard Chartered completes first end-to-end electronic transaction in the Middle East automotive sector
Jul 2015 A new Digital Era for Trade(JPMorgan)
Jul 2015 How the digitisation of trade finance is rocking the boat for banks (ANZ)
Apr 2015
90-second update: The BPO (video)(GTR)
Apr 2015
First ever CargoDocs BPO Plus (BPO+) transaction completed successfully
Mar 2015
First BPO in Italy to replace open account (GTR on UniCredit)
Case Studies
BNP Paribas Fortis - BP Aromatics (2015)
UniCredit (2015)
TEB, TEMSA, ZF and UniCredit (2015)
Commerzbank (2015)
China Merchants Bank and Angel Yeast (2015)
Bank of Tokyo-Mitsubishi UFJ
ROI for BP Petrochemicals
Itō Yōkadō, Bank of Tokyo Mitsubishi UFJ and Bank of China
Bank of Tokyo-Mitsubishi UFJ (PPT)
Siam Commercial Bank and PTT Polymer Marketing
Isbank
The Bank Payment ObligationA new payment method between L/C and open account
42
SellerBuyer
LC Advising Bank
LC Issuing Bank
Do
cum
ents
Contract
Documents
Do
cum
ents
Ad
vic
e
Ap
plic
atio
n
Issuance
Payment
Letter of
Credit
Bank services based on paper
document processing
SellerBuyer
Seller’s
Bank
Buyer’s
Bank
Contract
Payment
Open
Account
Documents
Bank services limited to
payment processing
Array of risk, financing and processing services to address
both cash management and trade finance needs
SellerBuyer
BPO Recipient
Bank
BPO Obligor
Bank
Contract
Documents
Payment
Bank
Payment
Obligation
Bank services based on
electronic trade data exchange
Data
Data
Data
43
The Bank Payment Obligation (BPO)
What is BPO?The Bank Payment Obligation is a new payment method based
on data matching which can be used for risk mitigation and
financing!
irrevocable
concret & conditional
What are the
general criterias of
a BPO?
What is new?
For the first time an open account payment obligation can be
confirmed by banks in order to get financed. The ICC supports
the market launch with the release of unified rules (URBPO).
„A Bank Payment Obligation (BPO) is an
irrevocable and independent undertaking of an
Obligor Bank to pay or to incur a deferred
payment obligation and pay at maturity
a specified amount to a Recipient Bank in
accordance
with the conditions specified in an established
baseline.“(Extract from the ICC URBPO)
44
Key roles and responsibilities for BPO
• Negotiate the merchandise details (description, quantities, unit price, ...)
• Agree on the amount of the payment obligation and settlement/charges conditions
• Define the payment terms: on receipt of the invoice, on delivery or deferred
• Agree on the expiry date, the shipping terms and latest shipment date
Buyers and Sellers
• Analyse the risk and manage internal compliance (KYC of the buyer)
• Price the BPO to the Buyer
• Propose the BPO in favour of the Recipient Bank (Seller’s Bank)
• Settle the BPO on the due date, subject to matching conditions having been met
• Provide optional financing services to the Buyer, as required
Obligor bank(s)
• Analyse the risk and manage internal compliance ( KYC on the Seller)
• Validate the Seller’s data set submissions
• Price the BPO-based services to the Seller
• Advise/confirm the BPO to the Seller
• Provide optional financing services to the Seller, as required
Recipient Bank
Baseline
Core data
The baseline specifies the
commercial details of an
underlying transaction and the
expected Data Sets
See next page
See PaymentTerms
component
tsmt.019.001.03
- Baseline
46
BPO flows for data, documents and goods
Seller Buyer
Carriers
6
Transport and
invoice data
2 Request BPO
based on PO
4 Shipment
Delivery of goods
Shipping documents and invoice8
1 Purchase order
BPO Recipient
Bank
Transport and
invoice data5
7Inform that payment is
due on agreed date 9 Transfer funds at maturity
3 Inform of BPO
establishment
TSU
Documents sent
directly to the
client
Use
minimum
fields
BPO Obligor Bank
47
The baseline gathers the matching conditions using data extracted from trade documents
48
Components for electronic matching of commercial trade data
Payment risk mitigation instrument
Communication Channel
Communication standardISO 20022 TSMT(Trade Service Management)
Between Banks:
TSU (Trade Services Utility)
BPO(Bank Payment Obligation)
Between customer and banks:
Bilaterally to be agreed
(Portal/SWIFT Score/ Papier…)
ISO 20022 tsmt messages
Message type Business message
tsmt.001.001.03 Acknowledgementtsmt.002.001.03 Activity Report tsmt.003.001.03 Activity Report Request tsmt.004.001.02 Activity Report Set Up Request tsmt.005.001.02 Amendment Acceptance tsmt.006.001.03 Amendment Acceptance Notification tsmt.007.001.02 Amendment Rejection tsmt.008.001.03 Amendment Rejection Notification tsmt.009.001.03 Baseline Amendment Request tsmt.010.001.03 Baseline Match Report tsmt.011.001.03 Baseline Report tsmt.012.001.03 Baseline ReSubmission tsmt.013.001.03 Data Set Match Report tsmt.014.001.03 Data Set Submission tsmt.015.001.03 Delta Report tsmt.016.001.03 Error Reporttsmt.017.001.03 Forward Data Set Submission Report tsmt.018.001.03 Full Push Through Report tsmt.019.001.03 Initial Baseline Submission tsmt.020.001.02 MisMatch Acceptance tsmt.021.001.03 MisMatch Acceptance Notification tsmt.022.001.02 MisMatch Rejection tsmt.023.001.03 MisMatch Rejection Notification tsmt.024.001.03 Action Reminder
tsmt.025.001.03 Status Change Notificationtsmt.026.001.02 Status Change Request tsmt.027.001.02 Status Change Request Acceptance tsmt.028.001.03 Status Change Request Notification tsmt.029.001.02 Status Change Request Rejectiontsmt.030.001.03 Status Change Request Rejection Notificationtsmt.031.001.03 Status Extension Acceptancetsmt.032.001.03 Status Extension Notificationtsmt.033.001.03 Status Extension Rejectiontsmt.034.001.03 Status Extension Rejection Notificationtsmt.035.001.03 Status Extension Requesttsmt.036.001.03 Status Extension Request Notificationtsmt.037.001.03 Status Report tsmt.038.001.03 Status Report Request tsmt.040.001.03 Time Out Notificationtsmt.041.001.03 Transaction Report tsmt.042.001.03 Transaction Report Request tsmt.044.001.01 IntentToPayNotificationtsmt.045.001.01 ForwardIntentToPayNotificationtsmt.046.001.01 IntentToPayReporttsmt.047.001.01 SpecialRequesttsmt.048.001.01 SpecialNotificationtsmt.049.001.01 RoleAndBaselineAcceptancetsmt.050.001.01 RoleAndBaselineRejectiontsmt.051.001.01 RoleAndBaselineAcceptanceNotificationtsmt.052.001.01 RoleAndBaselineRejectionNotification
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
C2B
http://www.iso20022.org/trade_services_messages.page
50
• Benefits of the BPO
51
Supply chain risks
Ordering Production Delivery InvoicingGood
Acceptance
Payment
Initiation
Purchase
Order (PO)Certificates
Transport
documents
Invoice
issuanceInvoice
approvalPayment
Payment risk mitigation
Pre-shipment finance
Post-
shipment
finance
Receivable
s finance
Payment
processing
Higher risk zone
Payment assurance & financing
services
No/Low risk zone
(Early) Payment services
By getting involved in open account trade
relationships as early as possible, banks
can efficiently secure and finance those
transactions
When dealing on open account trade terms, both buyers and sellers are faced with a series of risks and financing needs that banks are best
placed to deal with
52
BPO benefits
Payment Assurance
Increased
operational
efficiency
Risk
mitigation Payablesfinance
Receivables
financeBP
O
53
Risk mitigation
Importer
Possibility to get goods earlier
Increased flexibility vs L/C when changing deal
parameters
Improve relationship with exporter by diversifying settlement method and
add flexible options
Exporter
Delayed and non-payment risk mitigation
Safer than open account payment
Credit risk is transferred from importer to the
obligor bank or confirming bank
Benefits
for:
54
Payment assurance
Importer
Offer payment assurance to my supplier and
confirm the purchase order -> negotiate better
payment terms
Control payment time execution
Avoid advance payments
Exporter
Certainty to be paid on time -> improve liquidity
forecasts
Early settlement
(if “at sight”)
Benefits
for:
55
Improved operational efficiency
Importer
Easy procedure to issue BPO
Reduce operational burden of treating
complicated L/C and trade documents
“Just in time” orders to improve inventory
management and avoid storage costs
Both
Improve visibility and traceability
Smooth reconciliation of
payment & A/P or A/R
Electronic matching of structured data is faster than manual
examination
Exporter
Documents sent directly to importer and kept outside of the banking system
Reduce the risk of discrepancies, limit
to relevant trade information only
Reduce discrepancy workload
Benefits
for:
56
Time savings and efficiencies thanks to BPO
Sight Letter of Credit
Same day 2 days 5 working days Dispute period
8 working days Extended period
Presentdoc
Receivedoc
Payment (clean)
Payment (discrepancy)
Doc checking (by Advising Bank)
CourierDoc checking
(by Issuing Bank)Discrepancy
dispute
Send out doc
Bank Payment Obligation
Same day 2 days Acceptance period
3 working days Collection days eliminated
Submitdata
Send out doc
Receive doc / Payment
(matched)
Payment (mismatch)
Data matchingCourier
Acceptance of mismatch
Source: Dubai Trade
TSU/BPO for domestic trade flows
57
Seller Buyer
URBPO &
ISO 20022
on TSUBPO Obligor
BankBPO Recipient
Bank
All parties are in same country
When banks are from same banking group:
Use 2 different BICs (BIC8 or BIC11)
For the Obligor bank and the Recipient bank
58
ICC publications on the BPO
Click image to ICC
website Source: ICC
For more BPO related documents, click here and scroll down
to:
• BPO Accounting and Capital Treatment
• BPO Frequently Asked Questions for Banks (October 2014)
• BPO Frequently Asked Questions for Corporates (October 2014)
• BPO Brochure
• ICC Guidelines for the Creation of BPO Customer Agreements
(August 2015)
Click image to ICC
website Source: ICC
Click image to ICC
website Source: ICC
Recent BPO routes
B
E
DE
IT
T
H
CN
A
U
H
K
JP
T
W
T
R
UA
E OM
S
G
MY
K
R
S
I
KW
Banks reachable on TSU to process BPO transactions
CN 18
HK 13
IN 4
JP 6
KR 4
LK 1
PK 2
TW 2
CA 1
US 9
AR 2
BR 4
CL 1
PE 1
AT 2
BE 3
BG 1
CH 1
DE 7
ES 5
FR 5
GR 1
IT 6
NL 3
RO 1
SI 1
DK 1
FI 1
GB 11
SE 2
GH 1
KE 1
MA 1
NG 1
ZA 3
AE 5
JO 1
KW 1
LB 1
OM 1
QA 4
SA 1
TR 5
ID 5
MY 5
PH 2
SG 17
TH 7
VN 3
AU 4
50Countries reachable on TSU
189Banks (BIC8) reachable on TSU
62
• MT Category 7 Enhancements
Overall Project
• The Trade Finance Maintenance Working Group (TFMWG) launched a significant revamp of the cat 7 MTs (Letters of credit, guarantees and standbys) in 2013, taking into account change requests from previous years.
• The work resulted in 34 Change Requests (CRs) submitted by end of May 2014.
• It is a significant upgrade to the functionality and format of the 700 (L/C) series and 760 (guarantees/standbys) series of messages, including 8 new MTs
63
Implementation Time Line
64
2015
2016
2017
2018
L/C
2019
Guarantees
standbys
Feb Mar Sep
Feb May Jul Nov
DecFeb May Jul Nov
Country vote result
BPC Rejected 4 CRsBPC Approved 30 CRs
Advance Documentation
Dec
LIVET&TVTB UHB Documentation
SRG Documentation
SRG Documentation
LIVET&TVTB UHB Documentation
Jun
Annual Deadline for CR
Feb
65
MT Category 7 UpdateChanged messages
• MT 700 Issue of a Documentary Credit
• MT 701 Issue of a Documentary Credit
• MT 705 Pre-Advice of a Documentary Credit
• MT 707 Amendment to a Documentary Credit
• MT 710 Advice of a Third Bank's or a Non-Bank's Documentary Credit
• MT 711 Advice of a Third Bank's or a Non-Bank's Documentary Credit
• MT 720 Transfer of a Documentary Credit
• MT 721 Transfer of a Documentary Credit
• MT 730 Acknowledgement
• MT 732 Advice of Discharge
• MT 734 Advice of Refusal
• MT 740 Authorisation to Reimburse
• MT 742 Reimbursement Claim
• MT 747 Amendment to an Authorisation to Reimburse
• MT 750 Advice of Discrepancy
• MT 752 Authorisation to Pay, Accept or Negotiate
• MT 754 Advice of Payment/Acceptance/Negotiation
• MT 756 Advice of Reimbursement or Payment
• MT 760 Issue of a Demand Guarantee/Standby Letter of Credit
• MT 767 Amendment to a Demand Guarantee/Standby Letter of Credit Amendment
• MT 768 Acknowledgement of a Guarantee/Standby Message
• MT 769 Advice of Reduction or Release
66
Documentary
Credits
Guarantees
Standbys
MT Category 7 UpdateNew messages
• MT 708 Amendment to a Documentary Credit
• MT 744 Notice of Non-Conforming Reimbursement Claim
• MT 761 Issue of a Demand Guarantee/Standby Letter of Credit
• MT 765 Guarantee/Standby Letter of Credit Demand
• MT 775 Amendment to a Demand Guarantee/Standby Letter of Credit
• MT 785 Guarantee/Standby Letter of Credit Non Extension Notification
• MT 786 Guarantee/Standby Letter of Credit Demand Refusal
• MT 787 Guarantee/Standby Letter of Credit Amendment Response
• MT 759 Ancillary Trade Structured Message
67
Documentary
Credits
Guarantees
Standbys
All Cat 7
MT Category 7 Working GroupGeneral – L/C and Guarantees/Standbys
• Creation of a message MT 759 (Ancillary Trade Structured Message)
similar to MT 799 using a limited number of coded and structured fields
• Addition of a field to refer to a document sent by another channel (e.g. FileAct)
• Adoption of extended “Z”character set for longfields (e.g. 45A, 46A, 47A,71, 72, 73, 77)
68
X
Z
MT 759 Ancillary Trade Structured Message
69
Field 23H: Function
70
Documentary CreditsStatus quo in electronic communication standards
Applicant BeneficiaryIssuing Bank
Advising Bank
well structured C2B and B2C messages (SCORE MT 798)
- respective Bank-to-Bank MTs build the ‘backbone“ of the messages
- additional fields for communication Customer-to-Bank and vice versa
well structured B2B messages (MT 700, MT 710, MT 707, etc.)
- however, some messages are not structured enough (e.g. Amendment)
71
Documentary CreditsOverview of work items and topics - 1
• Re-design of MT 707
– Structured fields for any modification
– Use of codes ADD, DELETE, REPLACE ALL for the long narrative fields
– Specific tag for amendment charges
• Addition of 2 fields to indicate the Special Instructions for Payment (to be conveyed to the Beneficiary or for the Advising Bank only)
• Addition of the Bank that is requested to add confirmation or may add its confirmation
• NEW MSG: Continuation message for wording changes (MT 708)- 45B Description of Goods and/or Services- 46B Documents Required- 47B Additional Conditions
• NEW MSG: Advice of non-conforming claim (MT 744)Message sent by the reimbursing bank to the bank claiming reimbursement as notification that the claim, on the face of it, as not to be in accordance with the instruction in the Reimbursement Authorisation for the reason(s) as stated in this message.
72
Documentary CreditsOverview of work items and topics - 2
• Addition of additional narrative field 79Z to MT 730 and MT 752
• Renamed field 42P (Deferred Payment Details to Negotiation/Deferred Payment Details)
• Deletion of some codes from 40A (Form of Documentary Credit)
• - Deleted ‘revocable’ codes
• - In SR2019, the ‘standby’ codes will be removed
• Change field 43P (Partial Shipment) and 43T (Transshipment) to code– ALLOWED
– CONDITIONAL
– NOT ALLOWED
• Renamed and structured field 48 (Period for Presentation to Period for Presentation in days)
– 3n[/35x] - (Days)(Narrative)
• Changed field 49 (Confirmation Instructions) definition
• Changed usage rules for fields 45, 46 and 47 to support more extension, from 3 to 8 extension messages, for MT 701, MT 711 and MT
72173
Use of codes ADD, DELETE, REPLACE ALL for the long narrative fields
74
Guarantees and Standby Letters of Credit
Current standards
Applicant BeneficiaryIssuing Bank
Advising Bank
well structured Customer-to-Bank messages (SCORE MT 798)
unstructured Bank-to-Bank messages (MT 760, MT 767, etc.)
less structured Bank-to-Customer messages (SCORE MT 798)
75
Guarantees and Standby Letters of CreditOverview of work items and topics
• Enforcement of use of MT 760 (and MT 767) for Demand Guarantees /
Standby Letters of Credit
• Significant re-design of MT 760 + new continuation message (MT 761)
• Significant re-design of MT 767 + new continuation message (MT 775)
• NEW MT: Guarantee/SBLC Demand (incorporating Extend
or Pay) (MT 765)
• NEW MT: Guarantee/SBLC Non-Extension Notification (MT 785)
• NEW MT: Guarantee/SBLC Demand Refusal (MT 786)
• NEW MT: Guarantee/SBLC Amendment Response (MT 787)
• Addition of new field 23X (File Identification) to all messages
76
Guarantees and Standby Letters of Credit
General overview revised message structure of MT760
Sequence A
General Information
Sequence B
Undertaking Details
MT 760 MT 761
Wording of
Undertaking or
Counter-Undertaking
----------------------------Requested wording
for Local Undertaking
MT 761
MT 761
1
2
3
The revised MT 760 message consists primarily of structured fields and fields with coded options
(e.g. amount, parties, expiry details, etc.) The message has been designed with three blocks:
Sequence A: General information
Sequence B: indicates the details of the undertaking or counter-undertaking
Sequence C: (optional) indicates the details of the requested local undertaking
1
The extension message MT 761 message consists primarily of a big free text block in order to
specify the wording of the undertaking/counter-undertaking as well as the requested wording for the
local undertaking – if applicable 2
Up to a maximum of 8 MT 761 messages could accompany the MT 760 message
3
Sequence C
Local Undertaking Details
77
MT 760 Format Specifications
78
Sequence B Undertaking Details
79
Sequence C Local Undertaking Details
80
Sequence C Local Undertaking Details
81
MT 767 Format Specifications
82
83
Alexander R. Malaket, CITP, President
of Canadian consultancy OPUS Advisory
Services International Inc. has worked with SWIFT on this Information Paper
SWIFT & OPUS Advisory –Information Paper
Click on image to access online copy
