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

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1 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 201

2 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 2

3 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

4 Trends in het DK en e-letters of credit (2) 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

5 Trends in het DK en e-letters of credit (3) 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. 5

6 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 201 Amsterdam

7 Introduction 7

8 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 8

9 TSU (Trade Service Utility) 9

10 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 10

11 TSU Buyer Seller Buyer s Bank Transaction Matching Application Seller s Bank 11 11

12 TSU Buyer Seller 1 Buyer s Bank Transaction Matching Application Seller s Bank 12 1 Purchase Order data 12

13 TSU Buyer Seller 1 2 Buyer s Bank 2 2 Transaction Matching Application Seller s Bank 13 2 Purchase Order advice 13

14 TSU Buyer Seller Buyer s Bank Transaction Matching Application Seller s Bank 1 3 Accept PO data 1

15 TSU Buyer Seller Buyer s Bank 2 2 Established Transaction Matching baseline 3 Application Seller s Bank 15 Match results 15

16 TSU Buyer 5 Seller Buyer s Bank 2 2 Established Transaction Matching baseline 3 Application Seller s Bank 16 5 Shipment of goods Documents (if any) to buyer 16

17 TSU Buyer 5 Seller Buyer s Bank 2 2 Established Transaction Matching baseline 3 Application 6 Seller s Bank 17 6 Invoice and shipping data 17

18 TSU Buyer 5 Seller Buyer s Bank 2 2 Established Transaction Matching baseline 3 Application 7 6 Seller s Bank 18 7 Match results 18

19 TSU Buyer 5 Seller Buyer s Bank 2 2 Transaction Matching 3 Application 7 6 Seller s Bank 19 8 Accept or reject mismatches, if any 19

20 TSU Buyer 9 5 Seller Buyer s Bank 2 2 Transaction Matching 3 Application 7 6 Seller s Bank 20 9 Payment (outside of TSU) 20

21 BPO (Bank Payment Obligation) 21

22 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 22

23 Bank Payment Obligation (BPO) Buyer Seller Obligor Bank Transaction Matching Application Recipient Bank 23 23

24 Bank Payment Obligation (BPO) Buyer Seller 1 Obligor Bank Transaction Matching Application Recipient Bank 2 1 Purchase Order data + Request to issue BPO 2

25 Bank Payment Obligation (BPO) Buyer Seller 1 2 Obligor Bank 2 2 Transaction Matching Application Recipient Bank 25 2 Purchase Order advice with BPO option 25

26 Bank Payment Obligation (BPO) Buyer Seller Obligor Bank Transaction Matching Application Recipient Bank 26 3 Accept PO data 26

27 Bank Payment Obligation (BPO) Buyer Seller Obligor Bank 2 2 Established Transaction Matching baseline 3 Application Recipient Bank 27 Match results 27

28 Bank Payment Obligation (BPO) Buyer Seller Obligor Bank 2 2 Established Transaction BPO Matching established baseline 3 Application Recipient Bank 28 Match results 28

29 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Established Transaction BPO Matching established baseline 3 Application Recipient Bank 29 5 Shipment of goods Documents (if any) to buyer 29

30 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Established Transaction BPO Matching established baseline 3 Application 6 Recipient Bank 30 6 Invoice and shipping data 30

31 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Established Transaction BPO Matching established baseline 3 Application 7 6 Recipient Bank 31 7 Match results 31

32 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Transaction Matching 3 Application 7 6 Recipient Bank 32 8 Accept or reject mismatches, if any 32

33 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Transaction Matching 3 Application Recipient Bank 9 9 Settlement BPO: Payment at sight or deferred payment undertaking with payment at maturity

34 Bank Payment Obligation (BPO) 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 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. 3

35 Contracts and Legal Framework 35

36 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 36

37 Relationship between Obligor and Recipient Bank Communication through TSU (or other TMA) as per ISO standard Ruled by UR BPO and TSU (or other TMA) rulebook and bilateral agreements Bank-to-Bank Space 37

38 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 38

39 Competitive Space 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 39

40 The BPO in the world of Trade 0

41 Documents Advice Data Data BPO combines elements of both worlds Contract Contract Contract Buyer Seller Buyer Documents Seller Buyer Documents Seller Application Letter of Credit Documents Bank Payment Obligation Open Account LC Issuing Bank Documents Issuance LC Advising Bank Obligor Bank Data Recipient Bank Buyer s Bank Seller s Bank Payment Bank services based on paper document processing Payment Bank services based on electronic trade data exchange Payment Bank services limited to payment processing Array of risk, financing and processing services to address both cash management and trade finance needs 1

42 Risk Mitigation & Financing in the Supply Chain Ordering of goods Production of goods Shipment of goods Issuance of invoice Payment & cash management Purchase Order Certificates Transport Documents Invoice Approved Invoice Payment Initiation Alternative Services in Open Account E-invoicing Factoring Approved Payables Financing Payment Processing Financing Options with BPO Pre-Shipment Finance Post-Shipment Finance Risk Mitigation with BPO Payment Assurance Timely Payment 2

43 Key benefits for the seller Supply Chain Finance (optional) Pre-/post shipment finance Alternative to factoring, reverse factoring etc Reduced interest costs 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 3

44 Key benefits for the buyer Cash flow optimization Supply Chain Finance (optional) Control payment time execution Optimize credit utilization Pay key suppliers on time Reduce administrative costs Reduce investigations &disputes Outsource payables processing Extend payment terms (DPO) Negotiate commercial terms Reduce supply default risk

45 BPO Present and Future 5

46 Live BPO banks Banks with live transactions + 1 corporate case study Live Banks Region Intra / Interbank transations Bank of China APAC Intra in China Inter Bank of Tokyo Mitsubishi UFJ Korea Exchange Bank Standard Chartered Bank Siam Commercial Bank APAC Intra Inter CN Locations of live corporate supply chains CN, HK, JP, SG, TH, TW 6 Corporate case study Ito Yokado s Chinese suppliers Ito Yokado Mitsubishi-Shindoh Co.,Ltd. MSM (Thailand) Vale APAC Inter KR OMRON Automotive Electronics Korea Co.Ltd. APAC EMEA Intra BE, OM, TH, AE BP Chemicals Octal PTT Polymer Marketing Co in Thailand Polymer Marketing DMCC in Dubai APAC Inter TH PTT Polymer Marketing Co Hua Nan Bank APAC Inter TW Importer in TW Bangkok Bank APAC Inter TH Exporter in TH

47 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 7

48 55 Banks adopting BPO (update as at January 10 th 201) Including 15 from the Top20 Trade banks 8

49 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 9

50 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 50

51 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. 7:1 BW 51

52 The URBPO () 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 52

53 The BPO (slot) Toekomst BPO: The future is unwritten 53

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