Swift is scrapping its trade services utility (TSU), the centralised matching and workflow engine that operates as the backbone for the bank payment obligation (BPO).
Speaking to GTR, Marc Delbaere, global head of corporates and trade at Swift, says: “TSU has been a very niche success and important for banks and corporates using it, however its adoption has been limited, and as a cooperative we have to focus on solutions with wider adoption and application.”
GTR has learned that the service will be switched off in December 2020.
Commercialised by Swift in 2007, the TSU was originally created to improve the flow of information in the supply chain. The service matches data in items such as orders, invoices and transport documentation, allowing banks to re-intermediate across the value chain in open account trade. Adoption, however, was initially slow, and it was not until the introduction of the BPO in 2013 that the inter-bank matching application seemed to have found its raison d’être.
The BPO is a form of payment instruction which uses the TSU to match purchase orders and shipping documents. If the TSU finds a match between the data supplied electronically by the seller and that required in the purchase order, automatic payment is triggered. But despite being an elegant solution in theory, BPO take up was lacklustre at best.
GTR reported late last year that the payments network was in talks about the future of the TSU, with paperless trade platform provider essDocs seen as a likely suitor to help strengthen the matching engine’s value proposition. Now, though, it appears that Swift has thrown in the towel on the utility, ringing the final death knell for the ailing BPO.
The news comes just weeks after Commerzbank, a member of the BPO commercialisation group, which also comprises representatives of ANZ, MUFG Bank, BNP Paribas, JP Morgan, Standard Chartered and UniCredit, put out a whitepaper proposing an update to the uniform rules for BPO (URBPO) in order to promote further BPO adoption among both corporates and banks.
GTR understands that the group was informed by Swift of its decision just weeks after the release of the whitepaper, with an original shut-off date set for March 2020. Discussions to see if the service could be salvaged came to naught, however the group did manage to push the date for TSU deactivation out to the end of the year, which will allow time for a transition to other solutions.
“One can certainly understand Swift’s business decision, as volume growth had not met expectations,” one former BPO proponent tells GTR. “In retrospect, there is blame to go around among all of the participants, not least Swift for its benign neglect over the past five years. Regardless, market participants will continue in their march to digitise trade finance.”
“The BPO is not dead. The core concept of it is still alive,” says Angela Koll, Commerzbank’s product manager of trade and supply chain finance and innovation and author of the recent whitepaper. “Due to the decision of Swift, we will now concentrate on our blockchain initiatives, such as Marco Polo, where we have already created the next generation of an irrevocable payment commitment.”
Last month, Commerzbank completed its first live, commercial pilot transaction on the Marco Polo blockchain platform. The transaction involved the export of special hydraulic couplings from Germany to China, and the sale of pumps within Germany, with the flow of information exchanged through the Marco Polo platform: the companies used the solution to agree order and delivery details, and the buyer’s bank provided a conditional payment commitment. After delivery of the goods, the buyer entered delivery details onto the platform, which was automatically matched with previously agreed data. This finally triggered an irrevocable payment obligation on the part of the buyer’s bank.
“Swift TSU will be overruled by blockchain and possibly other technologies to come,” says Koll, adding that the advantage of blockchain as compared to Swift’s TSU is its ability to onboard additional stakeholders, from logistics companies to insurers, which enables banks to obtain data not only from the supplier, but directly from the source of the data.