Transcript Presentation title - ::: G

Trade finance products: Composition of
Trade Finance Project and its
importance for the integrations of SMEs
in the trade value chains
Urs Kern
28th March 2014
Geneve
Today many companies are globaly linked via integrated
supply chains
Institutions
Consumer
Production Centre
Suppliers
Implementation of production networks and supply chains cross countries
(particularly between industrialised and developing countries)
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Value chains increasingly fragmented, as companies
outsource more globally
Example Boeing
Boeing has transformed itself into a systems integrator and has outsourced an increasing proportion of its
aircraft production
737 Classic at
start of production
747 series at
start of production
787 Dreamliner
at start of production
10% outsourced
20% outsourced
80% outsourced
SOURCE: International Association of Machinists and Aerospace Workers; Boeing; Reuters; McKinsey Global Institute
Parts built by
Boeing in-house
SMEs plays a significant role in the global
supply chain
•
•
•
•
More flexible
Faster
More innovative
Cheaper
Software is a key enabler
of process improvement
and has led to closer
cooperation between
firms (e.g. via ERP, GTM,
TM, CRM, etc)
However, SME’s tend to be under capitalised. Buyers have a strategic interest to
integrate suppliers into the Financial Supply Chain
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General Supply Chain Finance Umbrella
Supply Chain Finance
Pre-Shipment
Post-Shipment
Trigger
point
Matching of purchase order data
Buyer
Purchase order with payment
obligation
Import Financing
Extension of payment due date
Seller
Transport data matching
Pre-Shipment Financing
(purchase order finance,
advanced payment)
Post-Shipment Financing
(Approved payables finance
Receivables purchase)
Invoice data matching
Source: Adapted from“BAFT-IFSA Product Definitions for Open Account Trade Processing and Open Account Trade Finance”, vom 13 Dezember 2010
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General structure of supply chain finance instruments
Distribution
(Client)
Production
(Market)
Business
relationship
& liability
Seller/
Exporter
Financing
services
a/c
Routing and
Settlement
+
Service
Provider
Contract
Processing
platform
• Limited buyer-seller relationships
• Target “wealthy” and risk-free corporates
• Based on proprietary formats and channels
• Business relationship with Trade Service
Provider
a/c
+
Buyer/
Importer
Risk &
processing
services
Innovation in SCF – The BPO
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Bank Payment Obligation (BPO)
What is BPO?
What are the
general criterias
of a BPO?
The Bank Payment Obligation is a new payment term based on data
matching which can be used for risk mitigation and financing!
irrevocable
concret & conditional
„A Bank Payment Obligation (BPO) is an irrevocable and
independent undertaking of an Obligor Bank to pay or to
incur a deferred payment obligation and pay at maturity
a specified amount to a Recipient Bank in accordance
with the conditions specified in an established baseline.“
(Extract from the URBPO)
What ist new?
Innovation in SCF – The BPO
For the first time an open account payment obligation can be confirmed by
banks in order to get financed. The ICC supports the market launch with the
release of unified rules (URBPO).
Three components for electronic matching of
commercial trade data
Communication standard
ISO 20022 TSMT
(Trade Service Management)
Between Banks:
TMA
(Trade Matching Application)
Communication Channel
Between customer and banks:
Bilaterally to be agreed
(Portal/SWIFT Score/ Papier…)
Payment risk mitigation instrument
BPO
(Bank Payment Obligation)
Innovation in SCF – The BPO
The BPO based on electronic data matching
1) Sign contract (PO)
Buyer
Matching of
contract data
2) PO data
Seller
3) SO data
TMA
Bank A
Bank B
4) Match PO/SO data & confirm
BPO is established
Buyer
Matching of
data
Seller
5) Datasets
Bank A
TMA
5) Datasets
Bank B
6) Match requested datasets & confirm
BPO is due
Buyer
Transfer
of funds
Bank A
Trade is settled
Seller
7) Debit buyer
FIN
9) Pay seller
Bank B
8) Transfer funds
TMA=Transaction Matching Application, PO= Purchase Order; SO= Sales Order
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Approved Payables Financing with BPO
1. Send all paper invoices
Buyer
Seller
2. Send only
approved
invoices
1. Send only
invoices for
financing
6. Approved
payables
financing
BPO
Buyer’s
Bank
4. Check invoice is approved
and resubmit baseline
G-NEXID workshop, 28th March 2014, Geneve
3. Initiate baseline with BPO
TMA
5. Dataset
Seller’s
Bank
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Summary: Supply Chain Finance for corporates
Open 4-corner vs. closed 3-corner business model
Distribution
(Client)
Production
(Market)
Distribution
(Client)
Business
relationship
& liability
Business
relationship
& liability
Financing
services
a/c
Routing and
Settlement
Service
Provider
Exporter’s
bank
Seller/
Exporter
Processing
platform
TMA
Contract
BPO
a/c
a/c
+
Buyer/
Importer
Processing
platform
Risk, financing &
processing
services
+
Contract
Routing and
Settlement
a/c
+
Seller/
Exporter
Production
(Market)
Risk &
processing
services
• Limited buyer-seller relationships
• Target “wealthy” and risk-free corporates
• Based on proprietary formats and channels
• Business relationship with Trade Service
Provider
+
Importer’s
bank
Buyer/
Importer
Risk, financing &
processing
services
Processing
platform
Routing and
Settlement
• Large and growing trade players worldwide
• Any corporate irrespective of their risk profile
• Requires open and interoperable standards
• Business relationship stays with the banks
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