Drive trade digitisation

From multi-bank messaging standards to new trade settlement instruments, we are driving innovation in trade finance

The Bank Payment Obligation (BPO)

Trade finance has long been characterised by paper-based processes, which are often time-consuming and inefficient. This is now changing – and SWIFT is playing a key role in driving the digitisation of trade flows.

The Bank Payment Obligation

Launched in 2013, the Bank Payment Obligation (BPO) is a standardised, irrevocable payment instruction which uses ISO 20022 data structures. The BPO offers buyers and sellers a way to secure and finance their trade transactions, regardless of size, geography or industry.

The BPO sits alongside payment terms such as letters of credit, advanced payment or open account. Unlike traditional instruments, however, the BPO combines legally binding rules with electronic messaging and matching capabilities.

Features of the BPO

  • Facilitated by the Trade Services Utility (TSU), SWIFT’s ISO 20022-compliant inter-bank messaging and transaction matching cloud application.
  • Use of the BPO is set out in a dedicated International Chamber of Commerce (ICC) rulebook.
  • Integrates into eDocumentation and eCommerce platforms, enabling trade flows to be digitised further.

Benefits for corporates

Banks’ proprietary supply chain finance solutions tend to provide finance at the penultimate stage of a trade transaction, when an invoice is approved. However, suppliers may require financing and risk mitigation tools at a much earlier point in the transaction – such as when a purchase order is raised.

Unlike supply chain finance, the BPO allows banks to provide risk and financing services when the sale contract is agreed between buyer and seller. As such, the BPO supports both pre-shipment and post-shipment finance.

Other benefits for corporations include:

  • Working capital and cash flow improvements.
  • Increased automation of payment, reconciliation and forecasting processes.
  • Win-win relationships between buyers and suppliers.

Testimonials

In the context of digitisation, our focus currently is on the Bank Payment Obligation, where we see potential and the opportunity for creative solutions. We have been doing several BPOs so far, in some instances replacing other trade finance products, in other instances allowing our buyer to benefit from working capital optimisation.”

Michaël F. Van Steenwinkel, Global Credit Manager, Petrochemicals at BP

Delays in receiving title documents, which affect the timely receipt of goods, have always been a significant challenge for us. With the help of Standard Chartered, we can now enjoy much faster turnaround times by utilising the BPO for trade settlement, and in the process, avoid additional costs such as commission and demurrage charges.

Mubarak Naser Al Sayer, CEO at Al-Sayer

Learn more

For more information, read our white paper.