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THE VALUE OF SWIFT TO THE FInAncIAL SUppLy cHAIn                                                                                              ISSUE 6 Q2 2011




                                                                    Editorial
  Contents                                                                      The Trade and Supply Chain
                                                                                markets: a changing world
  Editorial
  The Trade and Supply chain
                                                                                Key decisions and developments are set to alter
  markets: a changing world                                                     the landscape of established practices in trade
  page 1
                                                                                finance and invoicing.


                                                                                I
                   Industry                                                         n 2010, a number of major decisions were taken by industry
                      perspectives                                                  stakeholders to introduce improvements to the trade finance markets.
                        Supply chain                                                   First and foremost, the ICC Banking Commission has confirmed
                         finance evolution                                      it is extending its activities to the open account market. This
                              Craig Weeks, Global Head,Trade
                              Product Sales, Citi Global
                                                                                demonstrates the leadership of trade bankers who wish to introduce
                              Transaction Services, explains                    industry standards in the growing market of open account / supply
                              how banks and corporates can                      chain finance. The move will enable banks to respond in a collaborative
                              create a true partnership in trade.
                             page 2                                             way to the new needs expressed by their corporate customers.
                                                                                   Corporates are looking for multi-bank solutions in order to mitigate
                                                                                risk in transactions handled on open account terms since most of
               Value                                                            today’s solutions have no common foundations. The ICC bank payment
  The best of both worlds                                                       obligation (BPO) rules and supporting ISO 20022 messages offer banks
  The bank payment obligation                                                   the key foundations to provide their corporate customers with multi-
  (BPO) marries the convenience of
  open account trading with the risk                                            banking services for global trade operated on open account terms. The
  mitigation and payment finance                                                new ICC BPO Group co-chaired by ICC and SWIFT is steering this effort.
  benefits associated with traditional
                                                                                   In this edition, Craig Weeks, Citi, explains the importance of supply
  trade finance instruments.
  page 3                                                                        chain finance for buyers and sellers looking to optimise working capital
                                                                                management. John Bugeja, RBS, Dan Taylor and Harriette Resnick, J.P      .
  Meet SWIFT                                                                    Morgan, comment on the process of bringing the BPO to market. Sharyn
  Events                                                                        Trainor, Deutsche Bank, meanwhile illustrates the value proposition of DB’s
  page 5
                                                                                improved services for corporate customers.
                                                                                   On a related but distant front, the European Commission has confirmed
                       Interview
                                                                                its ambition to move the European market to electronic invoicing by
                         Bringing the BpO to market
                            Supply Chain on SWIFT spoke to                      2020. The benefits of e-invoicing are now universally recognised for both
                             Sharyn Trainor, Director, Global                   corporations and consumers. The market is attracting dozens of new
                              Financial Supply Chain Product
                              Management, Deutsche Bank,                        providers each year around the world. The challenge remains for those
                              about the bank’s approach to the                  providers to interoperate securely, smoothly and cost effectively. Industry
                              opportunities that TSU and BPO                    standards such as UN/CEFACT and ISO standards as well as the
                             present.
                                                                                European Committee for Standardisation’s interoperability agreements
                                                                                aim at addressing those obstacles. You can learn about SWIFT’s
                   Solutions                                                    role in achieving global interoperability in e-invoicing from Bottomline
              Open account: ISO 20022 standards                                 Technologies and Tieto (see page 8).
  for corporate-to-bank message flows                                              On the SWIFT side, we have extended our trade and supply chain
  A working group is preparing to adapt and test TSU messages
  for corporate-to-bank use.                                                    standards to the corporate-to-bank segment for both traditional trade finance
  page 7                                                                        and open account. With this, we offer banks and corporates end-to-end STP
                                                                                on the basis of public domain industry standards. Such standards are critical
  Standardisation                                                               for corporate customers looking for multi-bank solutions as they offer greater
  Gaining momentum
  Tackling the problem of standards diversity in                                independence from their banking partners and software vendors. The ‘Trade
  e-invoicing.                                                                  for Corporates’ standards have already attracted the major trade banks
  page 7                                                                        and are gaining increasing traction from the corporate market. The above
                                                                                decisions and developments enable banks to bring a range of new services
  Partners
                                                                                to the corporate market in the areas of treasury, credit, accounts payable and
  Supporting global e-invoicing
  Through e-invoicing service providers,                                        procurement. The challenge for the banks will be to carefully select which of
  SWIFT can provide global reach and                                            those services will be relevant in the short term for their own customers.
  standards as well as a robust link to                                            I hope you enjoy this edition of “Supply Chain on SWIFT”. We invite
  financing opportunities.
  page 8                                                                        you to provide us with your feedback at supplychain@swift.com.
                                                                                André Casterman, head of Cash,Trade and Supply Chain, SWIFT
                        Supply chain finance evolution
Industry perspectives


                                                                                                                                                          with the lure of improved remittance visibility
                                                                                                                                                          made available online. Buyers have the added
                                                                                                                                                          benefit of reducing transactions costs through
                        Craig Weeks, Global Head, Trade Product                                                                                           fewer payment issuance fees and lower
                                                                                                                                                          administrative costs in accounts payable, as
                        Sales, Citi Global Transaction Services, explains                                                                                 well as less frequent supplier inquiries.
                        how banks and corporates can create a true                                                                                          Supplier finance programs offer important
                                                                                                                                                          working capital benefits for suppliers as
                        partnership in trade.                                                                                                             well, through increased cash flow, reduced
                                                                                                                                                          accounts receivable and Days Sales
                                                                                                                                                          Outstanding (DSO), and lower capital costs.
                                                                                                                                                          Suppliers gain valuable peace of mind as a
                                             hile the recent economic                 suppliers alike in the form of working capital,                     result of full payment transparency with details



                          W
                                             downturn and resulting credit            lower cost of goods sold or higher margins.                         on approved payments and their timing.
                                             crisis may finally be subsiding,
                                             many lingering effects can               How supply chain finance works                                      The trend toward global programs
                                             still be felt. credit markets            Supplier finance programs represent an                              Supply chain finance programs are fast
                        continue to be cash constrained, leaving                      important means by which buyers can                                 becoming an important best practice for
                        large corporates with the significant challenge               facilitate more ample and lower cost financing                      companies executing global source-to-
                        of supporting suppliers in order to maintain                  to suppliers in need of liquidity. Relying on                       pay initiatives. More and more buyers and
                        critical trade flows. With a lack of liquidity in the         banking partners, buyers can identify post-                         suppliers are implementing these important
                        marketplace, buyers find themselves looking for               shipment financing programs that improve                            working capital solutions. The trend today is
                        ways to provide favourable financing terms to                 working capital costs associated with rising                        toward adoption of programs which provide
                        cash-strapped vendors.                                        commodity expenses and help achieve cost                            a global legal framework that drives greater
                           For many large corporates, supply chain                    efficiencies in the supply chain over time.                         consistency, along with supplier on-boarding
                        finance is playing a crucial role in helping to               Sellers can receive early payment by selling                        teams offering local knowledge and global
                        balance working capital optimisation objectives               their receivables to the buyer’s banking                            coordination. Supplier finance is becoming
                        with the need to stabilise global supply chains               partner, providing them with much-needed                            a critical procurement tool and a strategic
                        and stimulate trade flows. Supply chain financing             cash. In addition to accelerating cash                              enabler for negotiations with suppliers.
                        solutions are playing a vital and strategic part in           collection and increasing liquidity for suppliers,                     The evolution of supplier finance programs is
                        enabling buyers and sellers around the world to               supply chain financing tools enhance payment                        unlocking value for both buyers and suppliers.
                        meet their liquidity needs and promote the flow               visibility and reduce financing costs.                              These stakeholders are increasingly turning to
                        of goods and services between them.                             Through implementation of a supplier finance                      banking partners as a single point of contact for
                           Supply chain finance programs have                         program, buyers can improve relationships                           a wide range of trade capabilities and supply
                        evolved with the changing demands of the                      with suppliers, enhance supply chain stability                      finance programs that preserve cash flows and
                        marketplace. Today, they provide far greater                  and support corporate social responsibility                         offer supply chain stability, while minimising risk. l
                        value to both buyers and suppliers. In the                    initiatives such as sustainability and diversity                    l For more information on how your
                        past, these programs were viewed as fairly                    of disadvantaged supplier programs.                                     organisation could benefit from a supplier
                        inflexible; however, new program structures                   Furthermore, buyers can extract economic                                finance program, and why partnering with a
                        have been designed to provide increased value                 value from the unlocked rate arbitrage via                              large global bank with a worldwide footprint,
                        to corporate treasury, procurement teams and                  extended payment terms or other commercial                              on-the-ground expertise in more than 100
                                                                                      negotiations. A supply chain finance program                            countries, and industry-leading supply chain
                                                                                      can also provide a unique opportunity to                                solutions makes the most sense, contact
                                                                                      transition suppliers to electronic payments                             citi Global Transaction Services.




                                                                                      Supply chain finance programs are fast becoming an
                                                                                      important best practice for companies executing global
                                                                                      source-to-pay initiatives. More and more buyers and suppliers
                                                                                      are implementing these important working capital solutions.
                                                                                      Craig Weeks, Citi




 2                      Supply Chain on SWIFT         Visit swift.com for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/SConSWIFT or email us at supplychain@swift.com
        The best of both worlds
Value


                                                                                                                                      competing, but rather as providing another
                                                                                                                                      alternative for bank customers.”
                                                                                                                                        What the BpO adds to the data matching
        The bank payment obligation (BPO) marries                                                                                     exercise is a conditional undertaking by the
                                                                                                                                      issuing bank in favour of the receiving bank
        the convenience of open account trading with                                                                                  (see page 4). ”post-shipment, it opens up
        the risk mitigation and payment finance                                                                                       the potential for finance on a relatively easy
                                                                                                                                      basis,” Bugeja explains. “If there’s been a
        benefits associated with traditional trade finance                                                                            data match between the invoice and the
        instruments.                                                                                                                  purchase order, the performance risk has at
                                                                                                                                      that stage been eliminated so the post-
                                                                                                                                      shipment finance can be very readily available
                                                                                                                                      against the risk of the buyer.”




              I
                            t is estimated that some              seller’s perspective is a ‘receivables purchase’                      pre-shipment finance meanwhile is also
                            85% of global trade is                approach, which often involves credit                               facilitated by the BpO in the same way as by
                            now conducted on an                   insurance. However, Bugeja points out, “That                        the letter of credit, Bugeja suggests. “There is
                            open account basis. Risk              only solves the financing and risk problem                          still a degree of performance risk, but it is heavily
                            mitigation in an open                 post-shipment. It doesn’t replicate or replace                      mitigated, because the data has been matched
        account environment is, however, not as                   the traditional L/c.” The ‘payables finance’                        at the purchase order stage by both parties
        straightforward as with traditional trade                 solution is an alternative, buyer-centric                           and independently verified, typically by the
        finance instruments, such as documentary                  approach. “From a seller’s point of view, once                      trade services utility (TSU). The expectation of
        letters of credit (L/cs). “The question is, to            the invoice has been approved, it takes the                         successful performance is therefore very high.”
        what extent limitations in the current risk               financing off balance sheet and often allows
        mitigation strategy of corporate trading                  for financing at a more attractive price, but                       ICC approval
        partners are holding them back from doing                 it does nothing for the supplier prior to the                       In principle, the availability of the BpO will allow
        more business?” says John Bugeja, Global                  acceptance of the invoice,” he says.                                corporates to conduct more business as their
        Head, Trade products, Global Transaction                     The BpO potentially fills a gap in the current                   risk will be better managed and finance will be
        Services, The Royal Bank of Scotland. “To                 solutions set. “It provides many of the benefits                    more readily available to the supply chain. A
        what extent could they do more business                   of the L/c, both pre- and post-shipment and                         key factor, however, is the level of comfort that
        if they could mitigate risk more effectively              does so in a way that is not labour-intensive,                      counterparties feel with the legal underpinnings
        and have better access to finance for their               since it is based on matching data that exists                      of the new instrument. To this end, recognition
        supply chain?” he asks. Bugeja sees the new               anyway,” says Bugeja.                                               by the International chamber of commerce
        bank payment obligation (BpO) as playing a                   It should be seen as complementing the                           (Icc) and the adoption of Icc rules to govern
        potentially important role in that regard.                existing trade services that banks offer                            BpO transactions is seen as a key step in
           Beyond the issue of risk mitigation, the               their corporate customers. “The BpO is                              market adoption. “Icc approval is fundamental
        open account model addresses the need                     simply an additional method of financing                            both to the attitude of the corporates and the
        for finance in different ways. One, from the              trade,” says Dan Taylor, Executive Director,                        credit and capital processes within the banks,”
                                                                  Global Market Infrastructures, Treasury &                           says Bugeja. “If the rules are similar to the L/c
                                                                  Securities Services, J.p. Morgan and Vice                           rules, it will look like an evolution of something
                                                                  chairman on the International chamber                               people already understand.”
                                                                  of commerce’s commission on banking                                    The process of engaging the Icc is under
                                                                  techniques and practice. “It allows banks to                        way. An Icc BpO working group had its
                                                                  provide an additional service as an alternative                     first meeting in March. The starting point is
                                                                  to more traditional methods. I don’t see it as                      the existing SWIFT rule-book covering BpO




                                                                  [The BPO] provides many of the benefits of the L/C,
                                                                  both pre- and post-shipment and does so in a way that is
                                                                  not labour-intensive.
                                                                  John Bugeja, RBS




3       Supply Chain on SWIFT     Visit swift.com for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/SConSWIFT or email us at supplychain@swift.com
Value



          BPO in practice – two examples
          Offering the best of both worlds


          S
                  traddling the risk spectrum between
                  the letter of credit (L/C) and open                                                         L/C versus BPO versus OA
                  account (OA), the bank payment
          obligation (BPO) is a new instrument in                                                                         Contract                                                        Contract                                                  Contract
                                                                                                                                                                                          Documents                                                Documents
          the process of formal adoption by the                                 Buyer                                                       Seller                         Buyer                       Seller                       Buyer                       Seller




                                                                                                                                                     Documents
                                                                                                Application
          International Chamber of Commerce (ICC).                             Documents

                                                                                                                          L/C                                                            BPO                                                        OA



                                                                                                                                            Advice




                                                                                                                                                                            Data




                                                                                                                                                                                                            Data
          The BPO was designed by banks to provide
          complementary services to corporates who
                                                                                                                          Documents
          are either trading on OA already or planning                                                                                                                                      Data
                                                                                                                          Issuance                                          BPO                         BPO
          to move from L/C to OA. It allows them to                         LC Issuing
                                                                               Bank
                                                                                                                                          LC Advising
                                                                                                                                             Bank
                                                                                                                                                                           Obligor
                                                                                                                                                                            Bank
                                                                                                                                                                                                      Recipient
                                                                                                                                                                                                        Bank
                                                                                                                                                                                                                                   Buyer’s
                                                                                                                                                                                                                                    Bank
                                                                                                                                                                                                                                                               Seller’s
                                                                                                                                                                                                                                                                Bank
          make use of related banking services such                                                                       Payment                                                         Payment                                                  Payment

          as financing, payments, collections and
                                                                              Bank intermediation                                                                           Bank intermediation                              Bank involvement limited
          account reconciliation.                                            through processing of                                                                         using electronic flows                             to payment processing
                                                                              paper documentation


          BPO versus L/C                                                                                           Array of risk, financing and processing services to address
                                                                                                                     both cash management and trade finance needs
                                                                                                          Trends in Trade and Supply Chain finance and SWIFT's evolving portfolio

          The BPO is more convenient than an L/C,
          as it is based on electronic presentation of
          data rather than physical presentation of
          documents.                                                                                                      BPO brings mitigation of non-payment                                                     Example 1: non-payment risk
                                                                                                                          risk on open account transactions
            It is more efficient than an L/C because it
                                                                                           Corporates' needs




          focuses on the elements of the transaction                                                                             I need to offer
                                                                                                                                    payment
          that are relevant to the banking service                                                                              assurance to my                                                                                            I need to
                                                                                                                                 suppliers to do                                                                                          mitigate my
          required.                                                                                                             business with me                                                                                         international
                                                                                                                                on open account                                                                                          payment risk
            It is more cost-effective than an L/C as it                                                                               terms

          is linked to the automatic matching of data;
          for example, through the trade services utility                                                                      Buyer
                                                                                                                                                                  BPO
                                                                                                                                                                 Obligor
                                                                                                                                                                  Bank                                               BPO                           Large
          (TSU) matching application on SWIFT.
                                                                                           Banks' solutions




                                                                                                                                                                                                                   Recipient                       Seller

            It is more flexible than an L/C, because it                                                                                    I will take the                              BPO                          Bank
                                                                                                                                         buyer’s risk and                                                                  I will offer the
          can be added at any time during the lifecycle                                                                                  initiate the BPO
                                                                                                                                          to the Seller’s                    Transaction visibility
                                                                                                                                                                                                                           assurance of
                                                                                                                                                                                                                          payment to my
                                                                                                                                                 bank                           Structured data
          of a transaction for any amount that can be                                                                                                                         Data authentication
                                                                                                                                                                                                                              customer


          different from the total value of the goods                                                                                                                         Cost-effectiveness
                                                                                                                                                                                   Flexibility
          consigned.



          BPO versus OA
          The BPO is more secure than OA as it                                                       BPO offers financing opportunities                                                                                               Example 2: financing

          enables banks to mitigate risk and provide an                                              on open account transactions
          assurance of payment to the exporter.
                                                                                                      Corporates' needs




            It is more adaptable than OA because it can                                                                                 I want to help my                                                                                I need access
          be used as collateral for financing.                                                                                            suppliers have
                                                                                                                                       access to financing
                                                                                                                                                                                                                                        to flexible cost-
                                                                                                                                                                                                                                             effective
                                                                                                                                           in order to do
            Together with L/C and OA, the BPO now                                                                                       business with me
                                                                                                                                                                                                                                            financing
                                                                                                                                                                                                                                              options
                                                                                                                                        on open account
          allows banks to develop a wider array of
          innovative solutions to address diverse
                                                                                                                                                                                                                        BPO
          business needs.                                                                                                     Large                                BPO
                                                                                                                                                                                                                      Recipient
                                                                                                                                                                                                                        Bank
                                                                                                                                                                                                                                                  Seller
                                                                                                      Banks' solutions




                                                                                                                              buyer                               Obligor
                                                                                                                                                                   Bank
                                                                                                                                                                                          BPO                                      With the BPO, I will
                                                                                                                                                                                                                                    be able to offer a
                                                                                                                                          I will initiate                                                                         range of pre- or post-
                                                                                                                                         the BPO to the                                                                            shipment financing
          For further information, please                                                                                                 Seller’s bank                            Transaction visibility                             options to my
                                                                                                                                          so the risk is                              Structured data                                  customer at
          contact david.hennah@swift.com or                                                                                                   on me                                 Data authentication                              reasonable cost
                                                                                                                                                                                    Cost effectiveness
          nadine.louis@swift.com.                                                                                                                                                        Flexibility




4       Supply Chain on SWIFT      Visit swift.com for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/SConSWIFT or email us at supplychain@swift.com
Value


                                                                                                                                            transactions between banks. “The existing
                                                                                                                                            governing law for the SWIFT rules is the law of
                                                                                                                                            Belgium,” explains Harriette Resnick, Managing
                                                                                                                                            Director and Associate General counsel, J.p.
                                                                                                                                            Morgan chase. “I would expect there to be
                                                                                                                                            legal reviews in the relevant jurisdictions where
                                                                                                                                            banks will issue these instruments. They would
                                                                                                                                            then be able to get the necessary comfort
                                                                                                                                            level as we are structuring the BpO as an
                                                                                                                                            independent undertaking with many of the rule
                                                                                                                                            features of other payment instruments in the
                                                                                                                                            market. The mechanics of the Icc working
                                                                                                                                            group process will be similar to the way other
                                                                                                                                            Icc rules such as uniform customs and
                                                                                                                                            practice (Ucp) are developed with input from
                                                                                                                                            various industry representatives.”


                                                                                                                                            Commercialisation
                                                                                                                                            Banks will have ample opportunity to
                                                                                                                                            integrate the BpO into their existing trade
                                                                                                                                            services portfolio. Although the TSU provided
                                                                                                                                            the genesis for the BpO, under Icc rules,
                                                                                                                                            the instrument will most likely be platform-
                                                                                                                                            independent. “The Icc rules will be ISO
                                                                                                                                            20022 compliant, which means that any
                                                                                                                                            matching engine could, in principle, be used,”
                                                                                                                                            says Bugeja. “The TSU is the interbank
        We are structuring the BPO as an independent                                                                                        channel for data matching, which is very
        undertaking with many of the rule features of other                                                                                 useful in its own right because it makes
        payment instruments in the market.                                                                                                  it easy to work with partner banks. The
        Harriette Resnick,                                                                                                                  competitive space is how each bank delivers
           .
        J.P Morgan
                                                                                                                                            the BpO to its customers.” l



         Meet SWIFT
         7-Jun                  Exporta                    Innovations in Trade Finance Solutions Conference                                                                       New York


         21-22 Jun              Exporta                    8th Annual Trade & Supply Chain Solutions Conference                                                                    London


         15-Jul                 IIBLP                      Guarantee & Standby Forum                                                                                               Hong Kong


         16-Jul                 IIBLP                      Annual Survey of Letter of Credit Law & Practice                                                                        Hong Kong


         25-26 Jul              BAFT-IFSA                  Letters of Credit Workshop                                                                                              New York


         19-23 Sep              SWIFT                      Sibos                                                                                                                   Toronto


         26-27 Sep              Billentis                  EXPP Summit                                                                                                             Barcelona


         12-14 Oct              EuroFinance                International Cash and Treasury Management 2011                                                                         Rome




5       Supply Chain on SWIFT           Visit swift.com for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/SConSWIFT or email us at supplychain@swift.com
            Bringing the BPO to market
Interview



            Supply Chain on SWIFT spoke to Sharyn
            Trainor, Director, Global Financial Supply
            Chain Product Management, Deutsche Bank
            about the bank’s approach to the opportunities
            that TSU and BPO present.

            How has Deutsche Bank’s approach                            working together to identify and provide the
            to TSU and BPO commercialisation                            best solution is at the heart of all we do. Many
            evolved?                                                    aspects of the financial supply chain require a
            Deutsche Bank was involved in discussions                   partnership approach between counterparties.
            around the Trade Services Utility (TSU) from                We are constantly engaging with our corporate
            the start. With the first release of the TSU                clients as we work together to develop tailored
            our involvement deepened. However, it was                   solutions. We also felt it was critical to expand
            with the additional functionality of the bank               the bank-to-bank discussions around TSU
            payment obligation (BpO) that we became                     to actively include more input and feedback                         We see the TSU as an
            actively engaged in exploring the commercial                from corporates. In addition to our own                             opportunity to allow
            opportunities of the solution. We have a large              client discussions, as part of the European                         us to collaborate in the
            community of importers and exporters among                  user group, the German banks organised
                                                                                                                                            open account space with
            our client base, both in Europe and worldwide.              a corporate workshop to actively engage
            Working capital is a huge strategic priority for            corporates. In addition, we are working with
                                                                                                                                            other banks in a standard,
            them. With the shift to open account trading,               banks on a partnership or collaborative basis                       regulated fashion.
                                                                                                                                            Sharyn Trainor,
            clients are coming to us and looking for solutions          to identify joint business opportunities to                         Deutsche Bank
            to the challenges of risk mitigation and supply             provide greater value to our respective clients.
            chain financing and we want to move with them.
               To accommodate the heightened interest of                What feedback have you had from                                     robust portfolio of innovative open account
            our clients in financial supply chain solutions,            corporates so far?                                                  financial supply chain solutions. We have a
            we are investing in our supply chain offering               There has been lots of interest from                                robust supplier finance confirmed payables
            to maintain a leading position in this space.               corporates in innovative open account and                           offering that is available in over 25 countries.
            While the ideal situation for a bank is to                  financing capabilities. Many are actively                           This, together with a sophisticated receivables
            have both sides of the transaction – i.e. the               looking for alternative ways to access liquidity                    finance solution, will be enhanced and offered
            importer and exporter – as customers, there                 and build greater automation and efficiency                         on an integrated platform. In addition, as clients
            is a challenge for any one bank to cover every              in their processes. Key strategic priorities                        increasingly look for financing opportunities
            client’s credit needs in every geography. In the            include risk management, enhanced visibility                        earlier in the supply chain cycle we are
            traditional paper-based trade business, where               and the ability to improve working capital.                         expanding our platform-based pre- and post-
            banks already actively collaborate as a matter                 Multinational corporates are especially                          shipment offering. We have also automated
            of course, there are standard messages.                     interested in more flexible financing. Most of                      and integrated TSU capabilities into our
            TSU has the potential to create a similar                   the solutions on the market today are built                         proprietary offerings and supply chain portal to
            environment in the open account space. We                   around strategies like reverse factoring. There                     allow us to collaborate with other banks.
            see the TSU as an opportunity to allow us to                is certainly interest in multi-bank solutions                          We are an active participant in the Bank
            collaborate in the open account space with                  and standardisation. This can be supported                          payment Obligation commercialisation Group
            other banks in a standard, regulated fashion.               by initiatives such as the TSU.                                     and are currently in discussions with a number
                                                                                                                                            of clients and banks regarding pilots and a
            How are you going about engaging your                       Where is Deutsche Bank in terms                                     proof of concept to leverage the BpO. A key
            corporate customers in promoting new                        of products within its trade services                               milestone for the group is endorsement by the
            collaborative trade services?                               portfolio that are built on TSU and BPO?                            International chamber of commerce as this
            Understanding client needs and proactively                  Deutsche Bank has a rapidly growing and                             will aid market acceptance. l




6           Supply Chain on SWIFT       Visit swift.com for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/SConSWIFT or email us at supplychain@swift.com
            Open account: ISO 20022
Solutions



                                                                                                                                                Standardisation
            standards for corporate-to-                                                                                                         gaining momentum
                                                                                                                                                Tackling the problem of
            bank message flows                                                                                                                  standards diversity in
                                                                                                                                                e-invoicing.


                                                                                                                                                T
            A working group is preparing to adapt and test                                                                                               oday there is a multitude of
                                                                                                                                                         standards for e-invoicing. These
            TSU messages for corporate-to-bank use.                                                                                                      can be national, industry-specific
                                                                                                                                                or even proprietary for an individual
                                                                                                                                                customer. Experience has shown that
                                                                                                                                                multiple standards have not stopped
                                                                                                                                                trading parties exchanging e-invoices as




              T
                                 he trade services utility               The scope of the corporate-to-bank TSU                                 their service providers have provided the
                                 (TSU) is a matching and                 messaging group, which will validate                                   necessary conversions.
                                 workflow engine for open                the standards, is to agree the business                                   However, there is now increasing interest
                                 account transaction data.               content and information flows of a set of                              from service providers in moving towards
                                 The second release went                 new guidelines on existing messages or                                 a more standardised approach. Even
            live in March 2009 and uses a set of ISO                     new ISO 20022 messages, covering the                                   if mapping between formats is not an
                                                                                                                                                issue, there are often questions around
            20022 messages. These messages have                          communication between corporations and
                                                                                                                                                interpreting the semantics of different
            been designed for use between financial                      financial institutions to exchange TSU-
                                                                                                                                                message content standards.
            institutions and the TSU rather than between                 related information. It is envisaged that the
                                                                                                                                                   Banks have traditionally opted for
            financial institutions or between a financial                messages themselves might eventually
                                                                                                                                                standard messages in communicating
            institution and its customer, the buyer or seller            be supported in corporate ERp systems                                  with each other and wish to continue to do
            in a trade transaction.                                      such as SAp & Oracle and exchanged                                     so with e-invoicing. SWIFT, together with
               communication between the financial                       via alternative channels including bank                                other stakeholders, has provided support
            institution and its customer was seen                        proprietary systems or corporate access via                            to that objective with the delivery of the
            as outside the scope of TSU message                          SWIFT (ScORE).                                                         ISO 20022 financial invoice standard. This
            development. It was viewed as a competitive                     From the initial meetings, it appeared that                         standard provides value to corporates
            space, as opposed to the bank-to-TSU                         the existing TSU messages could be used                                beyond invoice content as the received
                                                                                                                                                data also includes compatible data
            collaborative space. Financial institutions have             with guidelines, and that there was no need
                                                                                                                                                elements which can be used to link the
            different offerings for their corporate clients              to develop new ISO messages. This brings
                                                                                                                                                invoice data into ISO 20022 payments and
            to input and receive information related to                  several advantages: ease of implementation
                                                                                                                                                trade finance messages – thus making it
            open account trading. This is often integrated               since new messages are similar or identical
                                                                                                                                                straightforward for the banks to facilitate.
            with traditional trade services, such as letters             to existing messages that have already been                               The ISO standard is clearly appropriate
            of credit and documentary collections. The                   implemented; straightforward mapping                                   for the financial sector, but there are also
            financial institution may offer the corporate                between the messages in the two spaces;                                indications of wider industry commitment
            the ability to send trade documents in various               and less time needed to define and publish                             from non-bank e-invoicing service
            formats, such as EDI, or scanned, and convert                the solution.                                                          providers. These include B2Boost,
            them as a service into other standard formats.                  The group agreed the list of functions that                         Bottomline Technologies Europe Ltd,
            It may also offer an interface on a web portal.              must be covered in the corporate-to-bank                               Fundtech, SIBS PROCESSOS, Tieto
               However, it is also possible that the two                 space. These are: baseline establishment,                              and Unifiedpost. Coexistence of several
                                                                                                                                                formats will continue, but a solid
            parties to a transaction have no preferred                   baseline amendment, data set submission
                                                                                                                                                foundation for change has been laid.
            format, although recognising that a structured               and intent to pay.
            format is highly desirable. This creates a risk                 The approach is being tested by a group
            of different ad hoc formats. A number of                     of participants, including Bayer and Bp                                For further information, please
            TSU participants therefore asked SWIFT if a                  chemical, in the second quarter of 2011.                               contact raimo.naatsaari@swift.com or
            standard format could be recommended for the                 The goal is to publish guidelines by the end                           david.dobbing@swift.com.
            exchange of TSU-related information between                  of August 2011. It is still possible to be part
            corporate clients and their financial institutions.          of this group and participate in the testing
               A working group to that end was                           exercise. For further information, please
            established at the beginning of this year.                   contact robert.marchal@swift.com. l




7           Supply Chain on SWIFT        Visit swift.com for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/SConSWIFT or email us at supplychain@swift.com
           Supporting global e-invoicing
Partners



           Through SWIFT, service providers can have
           access to improved global reach and standards as
           well as a robust link to financing opportunities.




              A
                                   s e-invoicing enters the                the challenge of either joining numerous hubs if
                                   corporate mainstream,                   deploying a three-corner model or appointing
                                   whether voluntarily or                  a service provider to intermediate with other
                                   mandated, there is plenty               specialist providers. carter sees the four-corner
                                   of advice for companies on              model gaining increasing traction. “It enables                      Corporates want to focus
           how to approach the automation process in                       companies to connect to a single service                            on their own business
           a cost-effective way. Solutions are available                   provider without worrying too much about how
                                                                                                                                               processes. They want
           from both bank and non-bank e-invoice                           their invoice is going to be delivered,” he says.
           service providers. With SWIFT now open                            Tapani Turunen, Director of E-Trade at Tieto,
                                                                                                                                               to leave questions of
           to e-invoice service providers under user                       the first e-invoicing service provider to sign                      connectivity and syntax
           category two, non-bank providers are also                       with SWIFT, takes a similar view. “Increasingly                     to specialists.
           taking advantage of SWIFT to facilitate inter-                  companies are looking to leave issues of                            Tapani Turunen,
                                                                                                                                               Tieto
           operability and standardisation.                                connectivity and formatting to the service
             Two models of e-invoicing interoperabililty are               providers,” he says. “There are a large number
           in use. The ‘three-corner’ model involves both                  of variations in receiver requirements and                          link in to any other customer or supplier on
           the buyer and seller having separate contractual                corporates want to focus on their own business                      the globe. SWIFT allows us to interoperate
           relationships with the same service provider                    processes. They want to leave questions of                          with other e-invoice providers in a neutral
           through a central hub. In the ‘four-corner’ model,              connectivity and syntax to specialists.”                            way. The alternative is to establish a bilateral
           each corporate has its own relationship with a                                                                                      agreement with every supplier in the market,
           service provider. The service provider takes care               The benefits of SWIFT                                               which will slow down or even stall adoption.”
           of the connectivity and interoperability between                As longstanding providers of services and                              “From a service provider perspective, each
           the trading parties through arrangements with                   solutions to a corporate client base, both                          new interface with another provider requires
           the provider on the other side.                                 Turunen and carter are enthusiastic about the                       time and investment,” says Turunen. “now
             “The mechanics of the underlying                              benefits that SWIFT can bring, notably in the                       with SWIFT, we can use one interface to other
           transmission are not the main concern of the                    areas of reach and standardisation. In addition,                    service providers.”
           corporates,” says Stephen carter, Senior                        however, there is the potential to reuse the                           Turunen, who also chairs the ISO 20022
           product Marketing Manager, Bottomline                           information contained in the invoicing process                      Trade Services Standards Evaluation Group,
           Technologies, a provider of collaborative                       to facilitate supply chain financing.                               points to certain ‘inbuilt’ advantages of SWIFT
           payment, invoice and document automation                          “We have a range of different solutions and                       that are very valuable: “It’s safe, global and
           solutions. “They simply want to be able to                      product lines, both three and four corner,”                         promotes usage of standards.” In addition, he
           send invoices out of their ERp.”                                says carter. “We have customers globally                            says, SWIFT allows for the finance industry
             For the supplier, the key factor is being able                so we are also a typical corporate, issuing                         to be brought seamlessly into the loop.
           to deliver the invoice in the manner and format                 invoices to a range of different purchasers.                        Both Tieto and Bottomline support the new
           required by the purchaser. Firms issuing multiple               SWIFT appears to be the only viable global                          ISO 20022 standard for financial invoices
           invoices a day to a global customer base face                   network that allows us as an organisation to                        issued in December 2010. The new standard
                                                                                                                                               eliminates most interoperability problems
                                                                                                                                               between existing standards.
                                                                                                                                                  A further benefit for Tieto is the ability to
           [The four-corner model] enables companies to connect to                                                                             leverage existing investments. “corporates
           a single service provider without worrying too much about                                                                           already use our infrastructure for SWIFT
           how their invoice is going to be delivered.                                                                                         payments so we can extend the benefits of our
           Stephen Carter, Bottomline Technologies                                                                                             existing infrastructure,” Turunen comments. l




8          Supply Chain on SWIFT           Visit swift.com for more information about SWIFT and its portfolio. Join the dialogue at www.swiftcommunity.net/SConSWIFT or email us at supplychain@swift.com

				
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