Is het nieuwe, digitale betalingsinstrument, The Bank ... · 4/11/2014 · • BPO constitutes a legally binding, valid and enforceable payment obligation of the Obligor Bank to

Is het nieuwe, digitale betalingsinstrument, The Bank Payment Obligation (BPO), de toekomst in de

internationale handel?

Marc van Maanen en Hugo Verschoren

NTHR-Symposium Elektronisch Contracteren 11 april 2014

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Agenda

1. Trends in het DK en e-Letters of credit

2. Uitleg van de werking van de BPO

3. The Uniform Rules for Bank Payment Obligations

Trends in het DK en e-Letters of credit (1)

• Afname L/C’s in Noord-Noordhandel

• Gedeeltelijke vervanging door open-account

• Toename L/C-volume in Zuid-Zuidhandel

3


• Complexiteit L/C door vele regels:

– UCP600

– ISBP (2007 Revision)

– ICC-opinies

– DOCDEX-beslissingen

– Rechterlijke uitspraken

• Geen afname van aantal ‘discrepancies’ bij L/C-presentaties

• Ondermijning systeem van L/C-financiering

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• Digitaliseringswensen bedrijfsleven maar geen omarming van de e-L/C

• Ondanks BOLERO is gebruik van e-B/L beperkt

• Amerikaanse L/C-specialist James Byrne:

“The e-UCP is only one of a long line of failures in

the efforts of market leaders to entice L/C users into using electronic data in lieu of paper documents.”

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The Bank Payment Obligation

The New Kid on the Block

Hugo Verschoren

Sr. Product Manager

Trade & Working Capital Solutions

Commercial Banking

ING Group, Amsterdam

NTHR-Symposium 2014

Amsterdam

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Introduction

Introduction

• The Bank Payment Obligation is “the new kid on the block”

• A new instrument in the world of Supply Chain Finance, Open Account

trading and Trade Finance

• Based on SWIFT’s Trade Service Utility (TSU)

• Will …

• Banks offer the BPO to its customers?

• The BPO be a success in the market?

• To be seen…

• But let’s first see how it works, what it is and what it does…

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Orange

RGB= 255,102,000

Light blue

RGB= 180,195,225

Dark blue

RGB= 000,000,102

Grey

RGB= 150,150,150

ING colour balance

Guideline

www.ing-presentations.intranet

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TSU

(Trade Service Utility)

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The Trade Service Utility (TSU)

• Platform developed by SWIFT

• Matches data from Purchase Order with data of the shipped goods

• In case of match, buyer receives a message that the goods ordered

have been shipped

• = invitation to pay

• Access only for banks under ISO20022 standard

• Corporates have access to TSU through their banks (preferably by IT

platforms)

• The TSU is a Transaction Matching Application and is the basis for the

BPO

11 11

Seller’s Bank Buyer’s Bank

Buyer Seller

TSU

11

Transaction

Matching

Application

12 12


Buyer Seller

TSU

12

Transaction

Matching

Application

1

1 Purchase Order data

13 13


Seller

TSU

13

Transaction

Matching

Application

1

2 2

2

2 Purchase Order advice

Buyer

14 14

TSU

14

Transaction

Matching

Application

1

2 2

2

3

3

3 Accept PO data


Buyer Seller

15 15

TSU

15

Transaction

Matching

Application

1

2 2

2

3

3

4 4

4 Match results


Buyer Seller

Established

baseline

16 16

TSU

16

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

5 Shipment of goods

Documents (if any) to buyer

Seller Buyer

Seller’s Bank Buyer’s Bank Established

baseline

17 17

TSU

17

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6

6 Invoice and shipping data

Seller Buyer

Seller’s Bank Buyer’s Bank Established

baseline

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Established

baseline

18

TSU

18

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7


Buyer Seller

7 Match results

19 19

TSU

19

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7 8

8 Accept or reject mismatches, if any


Buyer Seller

20 20

TSU

20

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7 8

9


Buyer Seller

9 Payment (outside of TSU)

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BPO

(Bank Payment Obligation)

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Bank Payment Obligation (BPO)

• Irrevocable undertaking issued by an Obligor Bank in favour of a

Recipient Bank to pay or incur a deferred payment undertaking

against a succesfull data matching with an Established Baseline

• Obligor Bank = Buyer’s Bank

• Recipient Bank = Beneficiary = Seller’s Bank

23 23

Recipient

Bank Obligor Bank

Buyer Seller


23

Transaction

Matching

Application

24 24

Recipient

Bank Obligor Bank

Buyer Seller


24

Transaction

Matching

Application

1

1 Purchase Order data +

Request to issue BPO

25 25

Recipient

Bank Obligor Bank

Seller


25

Transaction

Matching

Application

1

2 2

2

2 Purchase Order advice with

BPO option

Buyer

26 26


26

Transaction

Matching

Application

1

2 2

2

3

3

3 Accept PO data

Recipient

Bank Obligor Bank

Buyer Seller

27 27


27

Transaction

Matching

Application

1

2 2

2

3

3

4 4

4 Match results

Recipient

Bank Obligor Bank

Buyer Seller

Established

baseline

28 28


28

Transaction

Matching

Application

1

2 2

2

3

3

4 4

Recipient

Bank Obligor Bank

Buyer Seller

Established

baseline

BPO is

established

4 Match results

29 29


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Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

5 Shipment of goods

Documents (if any) to buyer

Seller Buyer

Recipient

Bank Obligor Bank

Established

baseline

BPO is

established

30 30


30

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6

6 Invoice and shipping data

Seller Buyer

Recipient

Bank Obligor Bank

Established

baseline

BPO is

established

31

Established

baseline

31


31

BPO is

established

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7

Recipient

Bank Obligor Bank

Buyer Seller

7 Match results

32 32


32

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7 8

8 Accept or reject mismatches, if any

Recipient

Bank Obligor Bank

Buyer Seller

33 33


33

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7 8

Recipient

Bank Obligor Bank

Buyer Seller

9 Settlement BPO: Payment at sight or

deferred payment undertaking with payment at maturity

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• What is it?

• A BPO is an irrevocable undertaking given by an Obligor bank (typically

the buyer’s bank) to a Recipient bank (the seller’s bank) to pay a

specified amount on an agreed date under the condition of a successful

electronic matching of data according to an industry-wide set of rules

adopted by the ICC.

• BPO constitutes a legally binding, valid and enforceable payment

obligation of the Obligor Bank to the Recipient Bank under the

appropriate standard of law, enforceable in accordance with its terms.

• BPO is a technology independent instrument based on ISO 20022 XML

that can be used on any open Transaction Matching Application (TMA)

such as the SWIFT Trade Service Utility platform (TSU).

• BPO is neither a light letter of credit nor an electronic letter of credit nor a

guarantee.

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35

Contracts and Legal Framework

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Relationship between parties in a BPO

• BPO is a bank-to-bank obligation

• Issuer = Obligor Bank

• Beneficiary = Recipient Bank

• Relationships between banks and their clients (buyer or seller):

• “Blue Ocean” concept

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Relationship between Obligor and Recipient Bank

• Communication through TSU (or other TMA) as per ISO 20022 standard

• Ruled by UR BPO and TSU (or other TMA) rulebook and bilateral

agreements

Bank-to-Bank Space

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Relationship between banks and their clients: “Blue Ocean” concept

• Obligor Bank ↔ Buyer

• Legal framework

• Arrangement to pay the amount due under the BPO

• Possible finance arrangements

Under seperate contract between Obligor Bank and Buyer

Competitive Space: Banks will have to develop their own agreements and

legal framework

• Recipient Bank ↔ Seller

• Legal framework

• Arrangement how Recipient Bank (Beneficiary of BPO) will treat a BPO in

its favour in the frame of a transaction of the seller to be developed

seperately

• “Silent Confirmation/Obligation”?

• Financing of deferred payment undertaking?

• Responsibility about genuiness of submitted data?

Under seperate contract between Recipient Bank and Seller

Competitive Space

Competitive Space

• Banks will have to develop their own legal frameworks and

agreements that rule the relationship between themselves and their

customers

• Communication: by preference automated front and back end systems

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Co

mp

eti

tive S

pace

Co

mp

eti

tive S

pace

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The BPO in the world of Trade

41

BPO combines elements of both worlds

Seller Buyer

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

Seller Buyer

Seller’s

Bank

Buyer’s

Bank

Contract

Payment

Open

Account

Documents

Bank services limited to

payment processing

Seller Buyer

Recipient Bank

Obligor Bank

Contract

Documents

Payment

Bank

Payment

Obligation

Bank services based on

electronic trade data exchange

Data

Data

Data

Array of risk, financing and processing services to address

both cash management and trade finance needs

E-invoicing Approved Payables Financing

Payment Processing

Factoring

Ordering of goods

Production of goods

Shipment of goods

Issuance of invoice

Payment & cash management

Invoice Transport

Documents Approved

Invoice Certificates

Payment Initiation

Payment Assurance

Pre-Shipment Finance Post-Shipment Finance

Timely Payment

Purchase Order

Financing Options with BPO

Alternative Services in Open Account

Risk Mitigation with BPO

Risk Mitigation & Financing in the Supply Chain

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Key benefits for the seller

Cash flow

optimization

Get paid on time

Improve DSO and DIO

Collect receivables earlier

Mitigate payment default risk of OA

Optimise risk-reward transactions

Improve liquidity forecasts

Improve discrepancy management

Easy integration with e-invoices

Reduce processing effort

Syndicate payment risk

Supply Chain

Finance

(optional)

Pre-/post shipment finance

Alternative to factoring, reverse

factoring etc

Reduced interest costs

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Key benefits for the buyer

Cash flow optimization

Control payment time execution

Optimize credit utilization

Pay key suppliers on time

Reduce administrative costs

Reduce investigations &disputes

Outsource payables

processing

Supply Chain

Finance

(optional)

Extend payment terms (DPO)

Negotiate commercial terms

Reduce supply default risk

45

BPO

Present and Future

Live BPO banks Banks with live transactions + 1 corporate case study

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Live Banks Region

Intra / Inter-

bank

transations

Locations of live

corporate supply

chains

Corporate case study

Bank of China APAC Intra in China

Inter

CN Ito Yokado’s Chinese

suppliers

Bank of Tokyo

Mitsubishi UFJ

APAC Intra

Inter

CN, HK, JP, SG, TH, TW Ito Yokado

Mitsubishi-Shindoh Co.,Ltd.

MSM (Thailand)

Vale

Korea Exchange

Bank

APAC Inter KR OMRON Automotive

Electronics Korea Co.Ltd.

Standard Chartered

Bank

APAC

EMEA

Intra BE, OM, TH, AE BP Chemicals

Octal

PTT Polymer Marketing Co

in Thailand

Polymer Marketing DMCC in

Dubai

Siam Commercial

Bank

APAC Inter TH PTT Polymer Marketing Co

Hua Nan Bank APAC Inter TW Importer in TW

Bangkok Bank APAC Inter TH Exporter in TH

Banks ready for live use of BPO Banks ready to go live but with no live BPO transactions yet

• ANZ

• Bank al Etihad (Jordan)

• Barclays

• Commercial Bank of Dubai

• Commerzbank

• Deutsche Bank

• J.P. Morgan

• Kasikornbank (Thailand)

• Maybank

• NLB (Nova Ljubljanska Banka)

• RBS

• RHB Bank

• Standard Bank of South Africa

• Sumitomo Mitsui Banking

Corporation (SMBC)

• Turkiye Is Bankasi

• UniCredit

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55 Banks adopting BPO (update as at January 10th 2014) Including 15 from the Top20 Trade banks 55

The URBPO (1)

• April 2013 goedkeuring ICC van de Uniform Rules for Bank Payment Obligations

• URBPO regelen rechtsverhouding tussen banken en de werking van de BPO

• URBPO moeten door partijen (banken) van toepassing worden verklaard

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The URBPO (2)

• BPO-Clausule in handelscontract

• Art. 15 URBPO rechtskeuze voor vestigingsplaats Obligor Bank

• Art. 15 (c) – geen nakoming door banken in geval van schending van “Regulatory Requirements”

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The URBPO (3)

• BPO opereert in een “Bank-to-Bank space”

• Begunstigde van een BPO is Recipient Bank, niet onbetaalde verkoper

• URBPO regelen slechts verhoudingen tussen banken

• Verhouding tussen bank en opdrachtgever is lastgeving ex art. 7:414 BW

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The URBPO (4)

• Artt. 6 en 7 leggen autonomie-beginsel vast:

“Banks deal with data and not with documents or the goods.”

• Voor betalingsverplichting bank is slechts beslissend of sprake is van een Data Match

• Enige uitzondering op autonomie-beginsel is fraude

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The BPO (slot)

• Toekomst BPO:

“The future is unwritten”

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