There has been a muted response among corporates to the idea of using the bank payment obligation (BPO).
Bankers at a Swift event designed to raise awareness of the tool among financiers and technology providers in London told GTR that the interest is there, but that few companies are willing to act as “guinea pigs”. However, the fact that the ICC gave the rules of the BPO the green light in Lisbon recently has raised hopes that pickup may be around the corner.
As the BPO prepares to launch in Paris this Friday (19 May), Andre Casterman, head of corporate and supply chain markets at Swift told the audience that there are now enough banks with knowledge of the BPO to take if forward, but that they must work on educating their clients.
To date, just six banks are live with the BPO: Standard Chartered, Bank of China, Bank of Tokyo Mitsubishi UFJ (BTMU), Siam Commercial Bank, Korea Exchange Bank and Hua Nan Commercial Bank. A further 10 are ready to go live, among them Barclays.
Standard Chartered issued the first end-to-end BPO transaction with BP last year, but despite this, Nirmal Radhakrishnan, head of corporate CTA and trade products Europe at the bank, told GTR that clients have been slow to embrace, preparing instead to see more practical examples of it working successfully.
Helen Jiang, global head of trade finance credit risk at mining company BHP Billiton, warned that unless those trying to promote the use of the BPO engage with all sides of the transaction, it will never take off. It’s no good if two banks are using the BPO, she said, but if the shipping intermediary isn’t aware of it, then there’s simply no point. She added that paperless transactions have been taking place among Asia’s shipping industry for 10 years and that while the BPO looks like a good product, there’s confusion among some corporates as to what benefit it would bring.
The ICC is preparing to rollout an educational programme, but Daniela Medina, vice-president trade and working capital at Barclays, told GTR that banks must assume some responsibility for informing their individual clients.
It’s expected that the solution will initially find its market among large corporates who have already got the technological capability to process paperless transactions. Kaustubh Joshi, associate director, transaction banking at Standard Chartered told GTR that he envisages it being used by companies that are already using the bank’s trading technology tools, which would eliminate the need for further infrastructural investment. Joshi also expects the BPO to be most effective in the commodities space.