SWIFT and ICC Issue Standards for Bank Payment Obligation
SWIFT and the Banking Commission of the International Chamber of Commerce (ICC) have released new legal and technology standards for bank payment obligation (BPO), which aim to help banks transform their supply chain finance (SCF) services.
The BPO is a new payment term that allows buyers and suppliers to secure and finance international trade transactions. It provides the benefits of a letter of credit (LoC) in an automated and secured environment, and enables banks to offer flexible risk mitigation and enhanced financing services to their corporate customers.
“The BPO, with the underlying ISO 20022 standards, is shaping the future of the trade industry and is a key opportunity for banks to innovate in the services they offer to their corporate customers,” said Gottfried Leibbrandt, chief executive officer (CEO), SWIFT.
SWIFT added that the new release offers a combination of legally-binding rules and electronic messaging (e-messaging) standards. The BPO rules will establish uniform practices for BPO market adoption. Together with the ISO 20022 messaging standards, these rules provide an industry wide foundation for banks to develop risk and financing services aligned with today’s technology.
“This is a golden age for trade finance,” commented Kah Chye Tan, chair of the ICC Banking Commission and global head of trade and working capital at Barclays. “All banks wish to better engage in open account transactions and the BPO will make it happen. It is vital that the industry aligns on enhanced rules and tools and by benefiting from ICC and SWIFT standards, banks will be better equipped to carry out their trade business.”
SWIFT has also issued a white paper, entitled ‘A New Start for Supply Chain Finance’, which reviews how industry standards and innovative technologies allow the trade industry to unlock the real potential of SCF.