Introducing SWIFT
Opening Remarks
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
What is SWIFT?
A co-operative organisation serving the
financial industry
A provider of
highly secure financial
messaging services
The financial
standardisation body
Community Standards Platform
SWIFT - secure financial messaging
• Store and forward, file transfer, interactive query & response • SWIFT strives for 99.999% availability
Technology
• Industry-owned community • Overseen by regulatory authorities
Neutrality
• Serving over 9,700 financial institutions across 209 countries • Payments, Securities, Foreign Exchange, Treasury and Trade • Reducing costs, improving automation, managing risk
Reach
Heritage • Established in 1973 by 239 banks in 15 countries • Developed shared messaging platform for financial transactions • Emphasis on security, reliability and availability
SWIFT Community
Banks
IMIs
Corporates
Insurance Companies
Payments MIs
Government Institutions
Trustees
Broker-Dealers
Payment Systems
Clearing & Settlement Systems
Depositories
Stock Exchanges Securities MIs
Country Coverage
• 4.0 billion messages/year • Over 9700 customers • 209 countries • Latest Peak day: 19.1 million messages (July 2011)
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
Trends
Digitization
Innovation
Collaboration
Regulation
SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 7
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.
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Industry standards … are those developed by international standardisation bodies
Industry standards are technology-neutral and industry-owned
• 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), …
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FIN MT7xx
FIN MT798
FileAct
MT798s Documents
FIN MT7xx
Buyer’s bank(s)
Seller Seller’s bank(s)
Buyer
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.
1 2 3
Trade Finance in a multi-bank environment
SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai
MT798s Documents
10
1
23 banks adopting SWIFT's MT798 12 from the top20 Trade banks
11 SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai
Industry Standards for supply chain finance
SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai 12
2
Any channel / any format / any solution
Trade Txn Matching Scheme
Any channel / any format / any solution
Seller Buyer
1 2 3
Bank Payment
Obligation Pub
lic D
omai
n C
omm
erci
al
• SWIFT's Trade Services Utility (TSU)
• Any inter-bank scheme based on ISO 20022 messages & rules
• Bank portal • SWIFT's SCORE • Paper
• Bank portal • SWIFT's SCORE • Paper
18 banks adopting BPO in 2011 7 from the top20 Trade banks
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SWIFT and ICC Cooperation
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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.
ICC BPO Working Group
15
Corporates
Banks
SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai Co-chairs ICC BPO Working Group: Dan Taylor, Vice-Chair ICC Banking Commission & Executive Director J.P. Morgan and André Casterman, SWIFT
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
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An alternative instrument for trade settlement
BPO combines the best of both worlds
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Seller Buyer
LC Advising Bank
LC Issuing Bank
Docum
ents
Contract
Documents
Doc
umen
ts
Adv
ice
Application
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
Array of risk, financing and processing services to address both cash and trade related needs
Seller Buyer
BPO Recipient
Bank BPO
Obligor Bank
Contract
Documents
Payment
Bank Payment
Obligation
Bank services based on electronic trade data exchange
Data
Dat
a
Dat
a
Payment assurance
Buyer commits to pay the seller on time via the banks
18
I need to offer payment assurance to my supplier
and confirm the PO
I will substitute for the creditworthiness of my
customer and guarantee the payment to the seller’s bank
(BPO) for a fee
Case 1: Seller wants to get paid on time via its own bank
I want to be certain that I will be paid on
time
I can offer the assurance of payment to my customer based on the BPO issued by
the buyer’s bank
2
3 4
1
SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai
Seller Buyer
BPO
TSU
BPO Obligor Bank
BPO Recipient Bank
Payment assurance
Supplier gets pre-shipment finance or advanced payment
19
I want my supplier to increase its financial
resilience and will help him get financing
I want to increase my liquidity either though
cost-effective financing
I will offer pre-shipment finance to the seller
with a (lower) risk on the buyer's bank
Case 2: Buyer mitigates the supplier default risk
I will guarantee the payment (BPO) to the seller’s bank upon the
confirmed PO
3 4
1 2
SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai Financing services
Seller Buyer
BPO
TSU
BPO Obligor Bank
BPO Recipient Bank
The leading Trade Finance vendors are accredited by SWIFT SWIFTReady
Trade Finance
• Bank-to-bank • Corporate-to-bank • LCs and
Guarantees
SWIFTReady for Corporates – Trade Finance
• Corporate-to-bank • LCs and Guarantees
SWIFTReady Trade Services Utility
• ISO 20022 TSMT messages
• Bank Payment Obligation rules
• Open Account
Vendor Trade Finance Solution
China Systems
Eximbills
CSI BankTrade
Misys Trade Innovation Plus
MIT CREDOC
Sopra Evolan IB
Surecomp DOKA 5, IMEX
Vendor Trade Finance Solution
ACI Open Account Manager
China Systems
Eximbills Enterprise
CSI OpenTrade
Misys Misys Trade Portal
Bank
Vendor Trade Finance Solution
GTC GlobalTrade Corporate
Misys Misys Trade Portal
Pinnacle Solutions Incorporated (PSI)
Synergy Trade Services (TS) Multi-bank Corporate Site (Conformance Statement) 20 SWIFT in Trade and Supply Chain - 18 November 2011 - Global Leaders Institute - Shanghai
Corp Bank
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.
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