Swift launches BPO

Swift is set to trial the Bank Payment Obligation (BPO), a new Trade Services Utility (TSU) programme designed to eliminate issues associated with traditional letters of credit (LC).

The BPO is an irrevocable obligation for an importer bank to pay, which is conditional on presentation of specific electronic data from an exporter bank, via the TSU interface.

The electronic data that the TSU requires is screened and categorised into mandatory and non-mandatory information.

The hope is that banks will only be presented with relevant information, rather than reams of unnecessary secondary data, ultimately reducing the risk of human error and fraud.

So far, 18 institutions that already use TSU have agreed to take part in live testing, with the first BPO deal due to take place with the Bank of China by the end of March.

David Hennah, senior product manager of supply chain, banking markets, at Swift, told GTR: “The BPO is a layer on top of the TSU and the TSU is a complex beast; it can be made as simple or as complicated as people want it to be. The TSU works by both primary import and export banks deciding on a baseline of conditions, and the BPO is one of these optional conditions.

“The importer bank can decide to have a BPO added to the baseline where they are saying that provided the exporter bank provides data compliant with the baseline, the importer bank will pay. The beauty of it is that everything is done electronically.”

Swift are hoping to use case studies taken from live testing with the Bank of China and other institutions to put forward a case to the International Chamber of Commerce to gain official approval, which will lead to the BPO becoming standard trade practice.