Trade Digitization and

CAT 7 Enhancements
Richa Mukherjee
Director, Trade and Treasury
SWIFT
Digitising Trade Finance
&
MT Category 7xx Enhancements Trade
Finance using MT 798

BAFT India Workshop, Chennai

August 1st, 2016
 Agenda

1. Introduction

2. Digitizing trade finance using MT 798

3. Digitizing trade finance using BPO- ISO 20022

3. MT Category 7xx Enhancements

4. Q & A

supplychain@swift.com 3
SWIFT scrl is the
global provider
of secure
financial
messaging
services

2
40 years serving
1980: First Asian countries connect to 2001: SWIFTNet goes live
the global SWIFT 2004: ISO 20022 introduction
financial 1986: SWIFT launches value-added 2008: SWIFT launches Alliance Lite
services 2009: SWIFT launches Innotribe
community 1987: SWIFT launches securities services

23 years serving

70 80 90 00 10
India’s financial
community
s
s s s s
Now serving
India’s domestic
financial markets
1973: Swift is born 2012: SWIFT India joint venture
1976: First operating centre opens
1977: SWIFT goes live – first message established
sent 2015: SWIFT India approved to provide
1979: North America connects to SWIFT
domestic messaging services, and
platform is live
1992: Interbank File Transfer goes live
1994: Customer support centre opens in Hong Kong
1997: SWIFT technology centre opens in the United
States

3
SWIFT scrl is
overseen by the G10 Extended
central banks of
G10 countries
oversight
and
central banks of
Canada
an Extended Belgium Australia
Oversight Group
including the ECB China
Reserve Bank of
India France Hong Kong
Germany India
Italy Korea
Japan Russia
The Saudi Arabia
Netherlands Singapore
United South Africa
Kingdom Turkey
United States
Switzerland
Sweden 4
 22.68 million
SWIFT scrl
in figures

FIN messages peak day (2013)

5+billion 10.4%
FIN messages per year (2013) Increase in FIN traffic (2013)

10,500+ 200+
SWIFT users Countries and territories

5
Customers can
re-use their existing
SWIFT gateways to
communicate with
foreign and domestic
counterparties

p
p

Provides cross-border
messaging services, Provides domestic
interfaces, implementation messaging services
services and support

8
SWIFT India
Foundation for
provides financial Comprehensiv
services to India’s communicatio
e, best in class
domestic markets n with all
messaging
financial
A joint venture by the services
community, for the markets
community

Axis Bank
Bank of Baroda
Bank of India
Canara Bank
HDFC Bank
ICICI Bank
Punjab National Bank Governed by
SWIFT scrl At a fair and
State Bank of India the Indian
competitive
Union Bank of India financial
(in alphabetical order) price in rupees
community

Meeting RBI objectives for (i) competition; (ii) reduced concentration

risks; and (iii) international best practices.
9
SWIFT India values

Excellence Community Innovation

10
SWIFT India is
approved by the
Reserve Bank of
India to provide
domestic financial Live Planned
messaging services
across all financial services services
markets
Next Gen RTGS (Pilot in NEFT, IMPS, ABPS, MMID
progress)
CCIL FX matching,
NACH (Pilot in progress) confirmations and reporting

Interbank Trade Finance Stock Exchanges

Interbank Treasury CSDs

Corporate-to-Bank Post trade securities

(Payments, Cash settlement
Management, Trade Finance
and Treasury)

11
• MT 798
• Facilitating multi-banking solutions in
documentary trade finance

12
Regulators and industry associations are promoting Trade Digitisation too

INDUSTRY LEGAL
SWIFT INDUSTRY SWIFT MESSAGING
INSTRUMENT RULES AND
STANDARD SERVICE
MARKET PRACTICE

Letter of Credit MT 7xx

FIN
(LC) MT 798 UCP 600 / eUCP

Bank Payment Trade Services

ISO 20022 tsmt
Obligation (BPO) Utility URBPO 750

Demand MT 7xx
FIN
Guarantee MT 798 URDG 758

Single European
Payments Area
ISO 20022
Credit Transfer / FileAct
pain pacs camt
Direct Debit
(SEPA)

Cross-border MT 103 13 SWIFT FIN service

FIN
Payment MT 9xx description
• Challenges and drivers

14
Corporate challenges with traditional trade instruments (1/2)
Export documentary credit
• Difficult to manage advices of
export L/Cs and amendments
received from multiple banks in
paper form and via different
banks portals
• Internally, difficult to collaborate
between treasury and various
business units on L/C allocation
and preparation of documents
• Lack of visibility of each step in
the transaction process
• Too many discrepancies, slowing
down document compliance
checking
• Delayed receipt of payment
15
Import documentary credit
• Treasury lacks visibility to the
allocation of credit facilities to
business units for import L/C
issuance
• Lack of standardised approval
process for import L/C issuance
• Delays in import L/C issuance
• No electronic global data base
of import L/Cs for real time
reporting of outstanding L/Cs.
Ideally by Business Unit, Bank,
Product, Counter Party
• Difficult to link import L/Cs with
export L/Cs for back to back
transactions
• Challenging to set up permanent
and transactional alarms on key
L/C dates
Corporate challenges with traditional trade instruments (2/2)

Standby L/C and Demand Guarantee

• Management is decentralized and handled independently by each

subsidiary
• Difficult for central treasury to monitor the terms and the
availability of Standby L/C and Guarantee facilities and improve the
diversification of business allocation between the banks
• How to offer flexibility for subsidiaries but enforce standard policies
moving forward?
• Reconciliation of related data and settlement of fees is time
consuming and prone to errors
• Complex documentation management will result in increased charges
• Transparency is not optimal and will result in differences between the
banks‘ and treasury‘s records
• With different technology solutions, more challenging to on-board
subsidiaries and banks

16
Drivers for Corporates to adopt multi-banking trade finance solutions

Digitise and
automate

Improve
internal Consolidate
workflow and information
control

Accelerate
trade
Standardise
processing to
bank interface
be more
competitive
17
• Industry standards

18
Multi-banking trade finance implementations on SWIFT

Rules • ICC Banking Commission's rules

• MT 798 standards
Messages • ISO 20022 standards

Identity • Business Identifier Code for banks

and corporates (BIC or ISO 9362)

Channel • SWIFT Corporate Environment

(SCORE)

• Certified vendors applications

Solutions • In-house development

19
 1
Industry standards for L/Cs and Guarantees

UCP 600
URDG 758
ISP98
MT Documents MT MT Documents
798 7XX 798

1 2 3

Buyer Seller
Buyer’s Seller’s
bank(s) bank(s)

SWIFT's MT 7xx are industry owned and technology FIN MT 7xx

neutral standards in support of ICC's rules for L/Cs, FIN MT 798
Standby L/Cs and Demand Guarantees FileAct
20
MT 798 adoption
Case studies and recent adoption news
Date Recent news
Feb Kongsberg Selects GTC's Multi-bank
2016 Trade Finance Platform and SWIFT
Case studies Oct Deutsche Bank: SWIFT MT798 –
2015 Global integrated solution for Trade
Volvo: Trade Finance Development Finance
Seaboard, GTC & Alliance Lite2: Automating Sep SWIFT MT798 supported by IBAS
processing of Export Documentary Credits 2015
Safran, Credit Agricole-CIB and GlobalTrade Sep GlobalTrade Corporation (GTC)
Corporation 2015 integrates SWIFT’s Alliance Lite2
with its Multi-bank Trade Finance
Alcatel-Lucent and Credit Agricole-CIB:
Platform
Automating Demand Guarantees in a multi-
bank environment using MT798 May Nokia selects GTC's multi-bank trade
2015 finance platform and SWIFT MT798
messages for their trade flows
Dec BillerudKorsnas selects GTC’s
2014 @GlobalTrade Export Document
Credit System to manage it s global
supplychain@swift.com LC flows 21
Corporates adopting the MT 798 standards

20
Corporates live
or implementing

supplychain@swift.com 22
 (*) ranking based on Cat 7
traffic

Banks adopting the MT 798 standards

Including 13 of the top20 trade banks (*)

46
Banking groups
live
or implementing

supplychain@swift.com 23
and more …
Issues for banks with non standardised multi-bank options
Scenarios: Corporate using a Corporate re- Corporate using a Corporate using MT
vendor platform using its FI BIC vendor BIC and
forcing banks to and the MT7xx the MT798
798 standards with its
adopt proprietary messages on the standards on the own BIC in SCORE
Major issues formats, security bank-to-bank FIN bank-to-bank FIN
for banks: and rules service service
Increased Additional fees for No fee for banks to re-use
vendor and banks to pay to SWIFT and SCORE for
technical the vendor; trade finance
additional IT
costs integration
Increased Additional vendor- Additional Single trade-specific
operational specific customer-specific process for all multi-bank
costs operational operational corporates
processes for practices for
limited number of banks to develop
clients
Increased Parties need to Parties need to Parties need to Standardised SCORE
legal develop vendor- develop develop vendor- agreement for cash and
complexity specific corporate-specific specific trade
contractual contractual contractual
and costs arrangements arrangements arrangements
Increased KYC Depends on Lack of visibility Lack of full Standardised SWIFT
risks vendor-owned on corporate 24 visibility to end- registration for corporates
legal frameworks identity, resulting corporate identity,
Issues for corporates with non standardised multi-bank options
Corporate using a Corporate re-using Corporate using a
Scenarios: Corporate using MT
vendor platform its FI BIC and the vendor BIC and
forcing banks to MT7xx messages the MT798
798 standards with its
Major issues own BIC in SCORE
adopt proprietary on the bank-to- standards on the
for formats, security bank FIN service bank-to-bank FIN
corporates: and rules service

Increased Need for multiple Proprietary Re-use SWIFT

vendor and solutions when development: so connectivity in use for
technical any of the banks packaged treasury and cash
required do not solutions and costs
costs support the cannot be shared
management
vendor platform
Not following Dependency on Not able to benefit Corporate does Single process with all
industry single vendor from full MT798 not benefit from banking partners
standards and solution: less functionality SWIFT's FIN
competition and Responsibility
best practices technical lock-in and Liability
(R&L)
Increased Parties need to Parties need to Corporate cannot Standardised SCORE
legal develop vendor- develop benefit from agreement for cash and
complexity specific corporate-specific standardised trade
contractual contractual legal
and costs arrangements arrangements documentation
Increased KYC Depends on Lack of visibility on25 Lack of full Standardised SWIFT
vendor-owned corporate identity, visibility to
• Scope of MT 798 standards

26
 Corporate-to-
Bank
Bank-to-
Corporate
MT 798<770>
Applicant MT 798<700> APPLICATION Bank
MT 798<701>
MT 798<771>
ISSUANCE NOTIFICATION MT 798<700>
MT 798<701>

MT 798<772>
AMENDMENT REQUEST
MT 798<707>

MT 798<773>
AMENDMENT NOTIFICATION
MT 798<707>

Import AMENDMENT ACCEPTANCE N O T I F I C A T I O NMT 798<736>

Documentary
MT 798<748>
Credits DISCREPANCY ADVICE
MT 798<750>
MT 798<749>
DISCREPANCY ADVICE RESPONSE

COMPLIANCE ADVICE NOTIFICATION MT 798<753>

MT 798<754>

DISCHARGE ADVICE NOTIFICATION

MT 798<731>
MT 798<732>

MT 798<733>
REFUSAL ADVICE NOTIFICATION
MT 798<734>

MT 798<755>
PAYMENT ADVICE NOTIFICATION MT 798<756>

27
IMPORT PAYMENT S E T T L E M E N T A D V I C E MT 798<757>
 Corporate-to-
Bank
Bank-to-
MT 798<774>
MT 798<700>
Corporate
CREDIT ADVICE
MT 798<701>
Bank Beneficiary
MT 798<776>
AMENDMENT ADVICE
MT 798<707>

AMENDMENT ACCEPT/REFUSAL A D V I C E MT 798<735>

MT 798<780>
MT 798<710> THIRD BANK ADVICE
MT 798<711>

MT 798<737>
Export PRESENTATION RESPONSE

MT 798<751>
Documentar MT 798<752>
A U T H O R I S A T I ON A D V I C E N O T I F I CA T I O N

y Credits MT 798<753> COMPLIANCE ADVICE NOTIFICATION

MT 798<754>

MT 798<731>
DISCHARGE ADVICE NOTIFICATION
MT 798<732>

MT 798<733>
REFUSAL ADVICE NOTIFICATION
MT 798<734>

MT 798<755>
PAYMENT ADVICE NOTIFICATION
MT 798<756>

TRANSFER REQUEST MT 798<722>

MT 798<782>
MT 798<720> TRANSFER ADVICE
MT 798<721>
28
MT 798<758> E X P O R T P A Y M E N T S E T T L E M E N T A D V I C E
 Corporate-to-
Bank
Bank-to-
Corporate

Applicant MT 798<761 or Bank

APPLICATION
784 >
MT 798<760>

NOTIFICATION MT 798<762 or
785 >
MT 798<760>
MT 798<763 or
AMENDMENT REQUEST
786 >
MT 798<767>
MT 798<764 or
AMENDMENT NOTIFICATION
Guarantees / 787 >
MT 798<767>
Standby EXTEND / PAY QUERY MT 798<777>
Letters of
Credit MT 798<778>
EXTEND / PAY RESPONSE

CLAIM NOTIFICATION MT 798<779>

CLAIM / CHARGES SETTLEMENT

MT 798<781>

MT 798<783> REDUCTION / RELEASE REQUEST

MT 798<766 >
REDUCTION / RELEASE ADVICE
MT 798<769>

29
 Corporate-to-
Bank
Bank-to-
Corporate

Bank Beneficiary
MT 798<745 or
ADVICE
746 >
MT 798<760>
MT 798<743 or
AMENDMENT ADVICE
744 >
MT 798<767>

PAYMENT CL AIM MT 798<712>

Guarantees / MT 798<714> CLAIM ACKNOWLEDGEMENT

Standby
Letters of
Credit

30
 Corporate-to-
Bank
Bank-to-
Corporate
C H A R G E S S E T T L E M E N T N O T I CE MT 798<793>
Applicant MT 798<790> Bank

CHARGES SETTLEMENT REQUEST MT 798<794>

MT 798<791>

MT 798<788>
F R E E F O R M AT
MT 798<799>

MT 798<789>
FREE FORMAT
MT 798<799>

Common
Group
Corporate-to-
Bank
Bank-to-
Corporate
MT 798<793>
C H A R G E S S E T T L E M E N T N O T I CE
Bank MT 798<790> Beneficiary

MT 798<794>
CHARGES SETTLEMENT REQUEST
MT 798<791>

MT 798<788>
F R E E F O R M AT
MT 798<799>

MT 798<789> FREE FORMAT

MT 798<799>
31
• Benefits and next steps

32
Win-win benefits for corporates and banks
Corporat
Benefits Banks
es
Consolidated Trade finance positions and
increased visibility
Single multi-bank & multi-business channel
Dematerialization & standardization
Re-use bank-to-bank FIN MT7xx data fields with
Corporates
Re-use of FileAct for any needed documents
to be included in the information flows
Overall cost reduction
Improved straight-through processing end-to-end
Improved overall transaction time
Only one interface development to integrate to
Bank back office (no need for vendor-specific
interfaces, procedures, contracts, formats)
Corporates and banks can make independent
decisions 33
• Bank Payment Obligation
A new payment method

34
 URBPO A BPO is an irrevocable undertaking given by
one bank to another bank that payment will be
made on a specified date after a successful
electronic matching of data according to an
ICC Uniform Rules for
industry-wide set of rules .
Bank Payment
Obligations

Designed to complement and not

to replace existing solutions

Confidential to participants only 35

Adoption of
ISO 20022
for BPO in
55+
Corporate relationships live on BPO
18 / 20
18 of the top20 trade banks (*) are
Trade reachable on TSU to process BPOs
Finance

19
Banking groups live on BPO / TSU
68%
68% of the top50 trade banks (*) are
reachable on TSU to process BPOs

25 80
Banking groups reachable on
Banking groups testing BPO on TSU
TSU

(*) ranking based on Cat 7

traffic

supplychain@swift.com
50
Countries reachable on TSU
189
Banks (BIC8) reachable on TSU
ISO 20022 for BPO brings value in various industries

Chemicals

General Retailers
Personal Goods

Mining

Technology Hardware
& Equipment

Automobiles & Parts

Food Producers

supplychain@swift.com 37
19 banking groups live on ISO 20022 for the BPO
Including 6 of the top15 trade banks (*)

(*) ranking based on Cat 7

supplychain@swift.com 38 traffic
Banking groups testing BPO on TSU
EMEA
Banca popolare dell'Emilia AM
Romagna Bank of America
Banco Santander Citi
Bank al Etihad J.P. Morgan
Crédit Agricole CIB
Danske Bank AP
Deutsche Bank Bank Mandiri
Finansbank HSBC
Garanti Bank Kasikornbank
ING Mizuho
la Caixa National Australia Bank
Rand Merchant Bank Sumitomo Mitsui Banking Corp.
Samba Financial Group (SMBC)
Standard Bank of South Africa
Non-live banks with 1 or more established
The Royal Bank of Scotland
baseline(s) in test in the last 12 months
UBS
supplychain@swift.com 39
BPO wins Payment Awards 2015

B2B Payments
Innovation of the Year

Read full article

supplychain@swift.com 40
ISO 20022 for BPO adoption
Case studies and recent adoption news

Case Studies Date Recent news

BNP Paribas Fortis - BP Aromatics (2015) Nov Toyota’s Middle East car dealer eyes
2015 more BPOs
UniCredit (2015)
Oct BCG Paper: Embracing Digital in
TEB, TEMSA, ZF and UniCredit (2015) 2015 Trade Finance

Commerzbank (2015) Aug Standard Chartered completes first

2015 end-to-end electronic transaction in
China Merchants Bank and Angel Yeast (2015) the Middle East automotive sector

Bank of Tokyo-Mitsubishi UFJ Jul 2015 A new Digital Era for Trade
(JPMorgan)
ROI for BP Petrochemicals Jul 2015 How the digitisation of trade finance
Itō Yōkadō, Bank of Tokyo Mitsubishi UFJ and is rocking the boat for banks (ANZ)
Bank of China Apr 90-second update: The BPO (video)
2015 (GTR)
Bank of Tokyo-Mitsubishi UFJ (PPT)
Apr First ever CargoDocs BPO Plus
Siam Commercial Bank and PTT Polymer 2015 (BPO+) transaction completed
Marketing successfully
Isbank supplychain@swift.com 41
Mar First BPO in Italy to replace open
 The Bank Payment Obligation
A new payment method between L/C and open account

Contract Contract Contract

Documents Documents
Buyer Seller Buyer Seller Buyer Seller

Documents
Application Bank
Documents

Letter of Open

Data

Data
Advice
Credit Payment
Account
Obligation

Documents
Data
Issuance BPO BPO
LC Issuing LC Advising Obligor Recipient Buyer’s Seller’s
Bank Bank Bank Bank Bank Bank
Payment Payment Payment

Bank services based on paper Bank services based on Bank services limited to
document processing electronic trade data exchange payment processing

Array of risk, financing and processing services to address

both cash management and trade finance needs

42
The Bank Payment Obligation (BPO)
The Bank Payment Obligation is a new payment method based
What is BPO? on data matching which can be used for risk mitigation and
financing!

For the first time an open account payment obligation can be

What is new? confirmed by banks in order to get financed. The ICC supports
the market launch with the release of unified rules (URBPO).

„A Bank Payment Obligation (BPO) is an

irrevocable and independent undertaking of an
Obligor Bank to pay or to incur a deferred
What are the irrevocable payment obligation and pay at maturity
general criterias of a specified amount to a Recipient Bank in
a BPO? concret & conditional accordance
with the conditions specified in an established
baseline.“
(Extract from the ICC URBPO)

43
Key roles and responsibilities for BPO

Buyers and Sellers

• Negotiate the merchandise details (description, quantities, unit price, ...)
• Agree on the amount of the payment obligation and settlement/charges
conditions
• Define the payment terms: on receipt of the invoice, on delivery or
deferred
• Agree on the expiry date, the shipping terms and latest shipment date

Obligor bank(s)

• Analyse the risk and manage internal compliance (KYC of the buyer)
• Price the BPO to the Buyer
• Propose the BPO in favour of the Recipient Bank (Seller’s Bank)
• Settle the BPO on the due date, subject to matching conditions having
been met
• Provide optional financing services to the Buyer, as required

Recipient Bank

• Analyse the risk and manage internal compliance ( KYC on the Seller)
• Validate the Seller’s data set submissions
• Price the BPO-based services to the Seller
• Advise/confirm the BPO to the Seller
• Provide optional financing services to the Seller, as required

44
 tsmt.019.001.03
- Baseline

Baseline

Core data

See next page

See PaymentTerms
component

The baseline specifies the

commercial details of an
underlying transaction and the
expected Data Sets
BPO flows for data, documents and
Carriers
goods
Delivery of goods
4 Shipment
Documents sent
Use directly to the
minimum client
fields
1 Purchase order

8 Shipping documents and invoice

Buyer Seller

2 Request BPO
based on PO
3 Inform of BPO
establishment
6

Transport and TSU 5 Transport and

invoice data BPO BPO
Obligor Recipient invoice data
Bank Bank

7 Inform that payment is

due on agreed date
9 Transfer funds
46 at maturity
The baseline gathers the matching conditions
using data extracted from trade documents

47
Components for electronic matching of commercial
trade data
ISO 20022 TSMT
Communication standard
(Trade Service Management)

Between Banks:
TSU
(Trade Services Utility)

Communication Channel
Between customer and
banks:
Bilaterally to be agreed
(Portal/SWIFT Score/ Papier…)

Payment risk mitigation instrument BPO

(Bank Payment Obligation)

48
ISO 20022 tsmt messages
tsmt.025.001.03 Status Change Notification
Message type Business message
tsmt.026.001.02 Status Change Request
C2B tsmt.001.001.03 Acknowledgement tsmt.027.001.02 Status Change Request Acceptance
tsmt.002.001.03 Activity Report tsmt.028.001.03 Status Change Request Notification
tsmt.003.001.03 Activity Report Request tsmt.029.001.02 Status Change Request Rejection
tsmt.004.001.02 Activity Report Set Up Request tsmt.030.001.03 Status Change Request Rejection Notification
C2B tsmt.005.001.02 Amendment Acceptance tsmt.031.001.03 Status Extension Acceptance
C2B tsmt.006.001.03 Amendment Acceptance Notification tsmt.032.001.03 Status Extension Notification
C2B tsmt.007.001.02 Amendment Rejection tsmt.033.001.03 Status Extension Rejection
C2B tsmt.008.001.03 Amendment Rejection Notification tsmt.034.001.03 Status Extension Rejection Notification
C2B tsmt.009.001.03 Baseline Amendment Request tsmt.035.001.03 Status Extension Request
C2B tsmt.010.001.03 Baseline Match Report tsmt.036.001.03 Status Extension Request Notification
C2B tsmt.011.001.03 Baseline Report tsmt.037.001.03 Status Report
C2B tsmt.012.001.03 Baseline ReSubmission tsmt.038.001.03 Status Report Request
C2B tsmt.013.001.03 Data Set Match Report tsmt.040.001.03 Time Out Notification
C2B
C2B tsmt.014.001.03 Data Set Submission tsmt.041.001.03 Transaction Report
C2B tsmt.015.001.03 Delta Report tsmt.042.001.03 Transaction Report Request
C2B tsmt.016.001.03 Error Report C2B tsmt.044.001.01 IntentToPayNotification
C2B tsmt.017.001.03 Forward Data Set Submission Report C2B tsmt.045.001.01 ForwardIntentToPayNotification
C2B tsmt.018.001.03 Full Push Through Report tsmt.046.001.01 IntentToPayReport
C2B
C2B tsmt.019.001.03 Initial Baseline Submission tsmt.047.001.01 SpecialRequest
C2B tsmt.020.001.02 MisMatch Acceptance tsmt.048.001.01 SpecialNotification
C2B tsmt.021.001.03 MisMatch Acceptance Notification tsmt.049.001.01 RoleAndBaselineAcceptance
C2B tsmt.022.001.02 MisMatch Rejection tsmt.050.001.01 RoleAndBaselineRejection
C2B tsmt.023.001.03 MisMatch Rejection Notification tsmt.051.001.01 RoleAndBaselineAcceptanceNotification
C2B tsmt.024.001.03 Action Reminder tsmt.052.001.01 RoleAndBaselineRejectionNotification

http://www.iso20022.org/trade_services_messages.page
• Benefits of the BPO

50
Supply chain risks
When dealing on open account trade terms, both buyers and sellers are
faced with a series of risks and financing needs that banks are best
placed to deal with

Good Payment
Ordering Production Delivery Invoicing
Acceptance Initiation

Purchase Transport Invoice Invoice

Certificates Payment
Order (PO) documents issuance approval

Post-
Payment risk mitigation Receivables Payment
shipment
Pre-shipment finance finance processing
finance

Higher risk zone No/Low risk zone

Payment assurance & financing (Early) Payment services
services

By getting involved in open account trade

relationships as early as possible, banks
can efficiently secure and finance those
transactions
51
BPO benefits
Payment
Assurance

Increased
Receivables
operational
finance
BP efficiency
O

Payables Risk
finance mitigation

52
Risk mitigation
Benefits
for:

Importer Exporter

Possibility to get goods Delayed and non-

earlier payment risk mitigation

Increased flexibility vs L/C

Safer than open account
when changing deal
payment
parameters

Improve relationship with Credit risk is transferred

exporter by diversifying from importer to the
settlement method and obligor bank or
add flexible options 53 confirming bank
Payment assurance
Benefits
for:
Importer Exporter
Offer payment assurance
to my supplier and
confirm the purchase Certainty to be paid on
order -> negotiate better time -> improve liquidity
payment terms forecasts

Control payment time

execution

Early settlement
(if “at sight”)
Avoid advance payments

54
Improved operational efficiency
Benefits
for:
Importer Exporter
Both

Documents sent
Easy procedure to Improve visibility directly to importer
issue BPO and traceability and kept outside of
the banking system

Reduce operational Smooth Reduce the risk of

burden of treating reconciliation of discrepancies, limit
complicated L/C and payment & A/P or to relevant trade
trade documents A/R information only
“Just in time” orders
Electronic matching
to improve
of structured data is Reduce discrepancy
inventory
faster than manual workload
management and
examination
avoid storage costs
55
 Time savings and efficiencies thanks to BPO
Present Send Receive Payment Payment
doc out doc doc (clean) (discrepancy)

Doc checking Doc checking Discrepancy

Courier
(by Advising Bank) (by Issuing Bank) dispute
Sight
Letter of Same day 2 days 5 working days Dispute period
Credit
8 working days Extended period

Submit Send out Receive doc / Payment

data doc Payment (mismatch)
(matched)
Bank
Data matching Acceptance of
Payment Courier
mismatch
Obligation
Same day 2 days Acceptance period

3 working days Collection days eliminated

56 Source: Dubai Trade
TSU/BPO for domestic trade flows

All parties are in same country

URBPO &
ISO 20022
on TSU
Buyer BPO Obligor BPO Recipient Seller
Bank Bank

When banks are from same banking group:

Use 2 different BICs (BIC8 or BIC11)
For the Obligor bank and the Recipient bank

57
ICC publications on the BPO

Click image to ICC

website Source: ICC
Click image to ICC Click image to ICC
website Source: ICC website Source: ICC

For more BPO related documents, click here and scroll down to:
• BPO Accounting and Capital Treatment
• BPO Frequently Asked Questions for Banks (October 2014)
• BPO Frequently Asked Questions for Corporates (October 2014)
• BPO Brochure
• ICC Guidelines for the Creation of BPO Customer Agreements (August
2015)
58
Recent BPO B
DE
E
routes S
ITI
T
R
JP
CN K
R
KW

UA
E OM T
T H
W
H K

MY
S
G

A
U

supplychain@swift.com 59
ISO 20022 traffic for BPO

supplychain@swift.com 60
Banks reachable on TSU to process BPO transactions

DK 1
AT 2 FI 1 CN 18

50
BE 3 GB 11 HK 13
BG 1 SE 2 IN 4
CH 1 JP 6
DE 7 KR 4
CA 1 AE 5 LK 1 Countries reachable on TSU
ES 5
US 9 FR 5 JO 1 PK 2
GR 1 KW 1 TW 2
IT 6 LB 1
NL 3 OM 1 ID 5

AR 2
RO
SI
1
1

GH 1
QA
SA
TR
4
1
5
MY
PH
SG
TH
5
2
17
7
189
BR 4 Banks (BIC8) reachable on TSU
KE 1 VN 3
CL 1
PE 1 MA 1
NG 1 AU 4
ZA 3

supplychain@swift.com 61
• MT Category 7 Enhancements

62
Overall Project
• The Trade Finance Maintenance Working Group (TFMWG) launched
a significant revamp of the cat 7 MTs (Letters of credit, guarantees
and standbys) in 2013, taking into account change requests from
previous years.
• The work resulted in 34 Change Requests (CRs) submitted by end of
May 2014.
• It is a significant upgrade to the functionality and format of the 700
(L/C) series and 760 (guarantees/standbys) series of messages,
including 8 new MTs
• The go-live dates are in November 2018 for L/C and November 2019
for guarantees/standbys.
• 4 CRs (party fields extension) were rejected by Board Payment
Committee decision in September 2015
• Advance User Hand-Book (UHB) documentation available in Q1 2016
• The detailed implementation time line is as follows:

63
 Implementation Time Line Annual Deadline for CR
Country vote result

BPC Approved 30 CRs BPC Rejected 4 CRs

2015
Feb Mar Jun Sep

Advance Documentation

2016
Feb

2017

VTB T&T UHB Documentation LIVE SRG Documentation

2018
L/C Feb May Jul Nov Dec

VTB T&T UHB Documentation LIVE SRG Documentation

2019
Guarantees Feb May Jul Nov Dec
standbys 64
65
 MT Category 7 Update
Changed messages
• MT 700 Issue of a Documentary Credit
• MT 701 Issue of a Documentary Credit
• MT 705 Pre-Advice of a Documentary Credit
• MT 707 Amendment to a Documentary Credit
• MT 710 Advice of a Third Bank's or a Non-Bank's Documentary Credit
• MT 711 Advice of a Third Bank's or a Non-Bank's Documentary Credit
• MT 720 Transfer of a Documentary Credit
• MT 721 Transfer of a Documentary Credit
• MT 730 Acknowledgement
• MT 732 Advice of Discharge
Documentary
Credits • MT 734 Advice of Refusal
• MT 740 Authorisation to Reimburse
• MT 742 Reimbursement Claim
• MT 747 Amendment to an Authorisation to Reimburse
• MT 750 Advice of Discrepancy
• MT 752 Authorisation to Pay, Accept or Negotiate
• MT 754 Advice of Payment/Acceptance/Negotiation
• MT 756 Advice of Reimbursement or Payment
• MT 760 Issue of a Demand Guarantee/Standby Letter of Credit
• MT 767 Amendment to a Demand Guarantee/Standby Letter of Credit Amendment
• MT 768 Acknowledgement of a Guarantee/Standby Message
• MT 769 Advice of Reduction or Release
Guarantees
Standbys

66
 MT Category 7 Update
New messages

Documentary • MT 708 Amendment to a Documentary Credit

Credits • MT 744 Notice of Non-Conforming Reimbursement Claim

• MT 761 Issue of a Demand Guarantee/Standby Letter of Credit

• MT 765 Guarantee/Standby Letter of Credit Demand
Guarantees
Standbys • MT 775 Amendment to a Demand Guarantee/Standby Letter of Credit
• MT 785 Guarantee/Standby Letter of Credit Non Extension Notification
• MT 786 Guarantee/Standby Letter of Credit Demand Refusal
• MT 787 Guarantee/Standby Letter of Credit Amendment Response
All Cat 7

• MT 759 Ancillary Trade Structured Message

67
MT Category 7 Working Group
General – L/C and Guarantees/Standbys

• Creation of a message MT 759 (Ancillary Trade Structured Message) similar

to MT 799 using a limited number of coded and structured fields
• Addition of a field to refer to a document sent by another channel (e.g. FileAct)
• Adoption of extended “Z”
character set for long
fields (e.g. 45A, 46A, 47A,
X
71, 72, 73, 77)

68
MT 759 Ancillary Trade Structured
Message

69
Field 23H: Function

70
 Documentary Credits
Status quo in electronic communication standards

Applicant Beneficiary
Issuing Bank
Advising Bank

well structured C2B and B2C messages (SCORE MT 798)

- respective Bank-to-Bank MTs build the ‘backbone“ of the messages
- additional fields for communication Customer-to-Bank and vice versa

well structured B2B messages (MT 700, MT 710, MT 707, etc.)

- however, some messages are not structured enough (e.g. Amendment)

71
Documentary Credits
Overview •ofRe-design
work items and topics - 1
of MT 707
• Structured fields for any modification
• Use of codes ADD, DELETE, REPLACE ALL for the long narrative fields
• Specific tag for amendment charges
• Addition of 2 fields to indicate the Special Instructions for Payment (to be
conveyed to the Beneficiary or for the Advising Bank only)
• Addition of the Bank that is requested to add confirmation or may add its
confirmation
• NEW MSG: Continuation message for wording changes (MT 708)
- 45B Description of Goods and/or Services
- 46B Documents Required
- 47B Additional Conditions
• NEW MSG: Advice of non-conforming claim (MT 744)
Message sent by the reimbursing bank to the bank claiming reimbursement as notification that the
claim, on the face of it, as not to be in accordance with the instruction in the Reimbursement
Authorisation for the reason(s) as stated in this message.

72
Documentary Credits
Overview of work items and topics - 2
• Addition of additional narrative field 79Z to MT 730 and MT 752
• Renamed field 42P (Deferred Payment Details to Negotiation/Deferred Payment Details)
• Deletion of some codes from 40A (Form of Documentary Credit)
• - Deleted ‘revocable’ codes

• - In SR2019, the ‘standby’ codes will be removed

• Change field 43P (Partial Shipment) and 43T (Transshipment) to code

• ALLOWED
• CONDITIONAL
• NOT ALLOWED

• Renamed and structured field 48 (Period for Presentation to Period for Presentation in days)
• 3n[/35x] - (Days)(Narrative)

• Changed field 49 (Confirmation Instructions) definition

• Changed usage rules for fields 45, 46 and 47 to support more extension,
from 3 to 8 extension messages, for MT 701, MT 711 and MT 721

73
Use of codes ADD, DELETE, REPLACE ALL for the long narrative fields

74
 Guarantees and Standby Letters of
Credit
Current standards

Applicant Beneficiary
Issuing Bank
Advising Bank

well structured Customer-to-Bank messages (SCORE MT 798)

unstructured Bank-to-Bank messages (MT 760, MT 767, etc.)

less structured Bank-to-Customer messages (SCORE MT 798)

75
Guarantees and Standby Letters of Credit
Overview of work items and topics
• Enforcement of use of MT 760 (and MT 767) for Demand Guarantees /
Standby Letters of Credit
• Significant re-design of MT 760 + new continuation message (MT 761)
• Significant re-design of MT 767 + new continuation message (MT 775)
• NEW MT: Guarantee/SBLC Demand (incorporating Extend
or Pay) (MT 765)
• NEW MT: Guarantee/SBLC Non-Extension Notification (MT 785)
• NEW MT: Guarantee/SBLC Demand Refusal (MT 786)
• NEW MT: Guarantee/SBLC Amendment Response (MT 787)
• Addition of new field 23X (File Identification) to all messages

76
 Guarantees and Standby Letters of
Credit
General overview revised message structure of MT760
MT 760 2 MT 761
1 3
Sequence A
General Information
Wording of MT 761
Undertaking or
Sequence B Counter-Undertaking
Undertaking Details ----------------------------
Requested wording MT 761
Sequence C
Local Undertaking Details
for Local Undertaking

The revised MT 760 message consists primarily of structured fields and fields with coded options
(e.g. amount, parties, expiry details, etc.) The message has been designed with three blocks:
1 Sequence A: General information
Sequence B: indicates the details of the undertaking or counter-undertaking
Sequence C: (optional) indicates the details of the requested local undertaking

The extension message MT 761 message consists primarily of a big free text block in order to
2 specify the wording of the undertaking/counter-undertaking as well as the requested wording for the
local undertaking – if applicable
Up to a maximum of 8 MT 761 messages could accompany the MT 760 message
3 77
MT 760 Format Specifications

78
Sequence B Undertaking Details

79
Sequence C Local Undertaking Details

80
Sequence C Local Undertaking Details

81
MT 767 Format Specifications

82
83
SWIFT & OPUS Advisory –
Information Paper
Alexander R. Malaket, CITP, President
of Canadian consultancy OPUS Advisory
Services International Inc. has worked with SWIFT on
this Information Paper

Click on image to access online copy

supplychain@swift.com 84
For more information visit us at
www.swiftindia.org.in

Or

Contact us at
contactus@swiftindia.org.in