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Justin Pugsley talks to Arthur Vonchek, chief executive of Bolero, about its platform and why it is drawing in both banks and corporates.

“We are the only people who can do multi-banking for trade finance,” says Arthur Vonchek, chief executive of Bolero. What gives him the confidence to make such a bold statement is the fact that the Bolero platform is already populated by about 40 financial institutions, which are actually using it with their corporate clients, rather than just doing pilots.

“The other multi-banking initiatives out there seem to revolve around very small groups of people. Often there’s an awful lot of manual work going on in the background to make them work, which is not efficient,” says Vonchek.

Multi-banking platforms have had a chequered history and seem to have been a battleground for competing standards and initiatives from various banks and corporates. In an ideal world, they’re supposed to bring the financial supply chains up to date with the physical supply chains.

The best in class supply chains are heavily automated, responsive and flexible and are cost efficient. By contrast, trade finance is still often clogged by paperwork, delays, legacy IT systems and manual processes. Also, individual banks have their own proprietary systems, which they often view as a form of product differentiation, though that is beginning to change. The problem is that the largest corporates may have relationships with over 120 banks, many with their own proprietary platforms.

For a user to deal with so many different platforms is a logistical nightmare. Some banks responded by taking a lead bank approach with other banks transacting via its platform. It may solve one problem, but according to Vonchek, it raises a whole host of new ones. “There are issues over client confidentiality, which banks are very sensitive about,” he says.
“To make this work properly requires a whole load of complex legal agreements and not everyone will go along with this anyway.”

Meanwhile, some large corporates insisted that their banks had to transact via their own proprietary platforms, thus attempting to turn the tables on the banks. Neither approach is really a solution though.

Thanks largely to internet technology, multi-banking platforms were supposed to consign such frustrations to history. According to Vonchek, the reason these various initiatives never really gained traction was because they were either specifically bank-centric or specifically corporate-centric.

“It’s a very binary approach,” he says. “They weren’t taking into account that trade finance is a community made up of banks, corporates and their supply chains and so on.”

He also cites the limitations of existing Swift messaging as an issue. Various messaging formats covering areas such as letter of credit confirmations, amendments and requests only have a very limited number of fields to input information, which makes it very difficult for a corporate to deal with anything but the most straightforward communications. Bolero responded by dramatically increasing the number of fields in its messaging formats, which enables much richer content, which can in turn deal with a greater number of situations. Banks and corporates can in turn map that data and transfer it into their own programmes for processing.

Another issue is the often poor integration between front and back office applications, which can not only slow processes but introduce errors as data is lost or not transferred properly. These back office difficulties – often due to legacy or proprietary systems precariously held together by patches – undermine many of the efficiencies obtained from the front-end platform, which is essentially about self-service. Bolero has responded by using internet-based technologies, which favour interoperability that can easily connect to a user’s back office function.

“We opted for a Software as a Service (SaaS) model, which fully supports a multi-tenanted approach,” says Vonchek. With all customers effectively sharing the same software it makes updates and upgrades a lot faster and all users benefit simultaneously. The platform, which is hosted by Swift, also supports state-of-the-art security.

Bolero has spent years honing solutions to all these various difficulties and comes to the multi-banking dilemma as a third-party neutral provider. “We take into account different users’ needs,” says Vonchek.

“We see Bolero as a neutral third party platform. We see it as infrastructure for the industry rather than just another solution (product).”

Bolero has a ‘rule book’  governing activity over the platform, which all users must subscribe to. It also guarantees the originality of all documents crossing its network.

However, the need to make supply chain finance work seems to have pushed banks towards accepting multi-banking platforms. “I would say this went through four phases: resistance, reluctance, passive support and finally active support,” says Vonchek.

“We’re getting into the fourth phase now.” Indeed, banks are much more aware of multi-banking platforms and why their clients need them. “They realise that commoditising banking services is often near the bottom of their priorities,” says Vonchek.

It’s much more about being able to transact efficiently with the right banks for the right transaction. It also about integrating finance with the rest of the supply chain. Related to that is the issue of having all the data in usable electronic formats so it can flow seamlessly with other data coming from the supply chain.

“Banks don’t always realise that processing letters of credit and other trade finance instruments represents just one aspect of the financial supply chain,” says Vonchek. “Corporates are dealing with the process from beginning to end and have to handle a lot of documentation.”

The more enlightened banks are taking these issues to heart and are trying to adapt to the needs of the leading corporates. They’re making sure that they’re becoming a vital component of the supply chain rather than acting as a break on its smooth functioning.

A corporate point of view
ABB, the Swedish-Swiss engineering conglomerate , agreed to speak with GTR about why it favours multi-banking platforms.

“We have over 35,000 bank guarantees outstanding as of today and we wanted one application from which to manage these guarantees,” says Peter Gisler, group vice-president, head of export and trade finance with ABB Asea Brown Boveri.

He explains that it does not make sense to use the different proprietary platforms of the different banks. “We use 100-150 banks, there are ABB companies in over 80 countries and we have over 35,000 transactions outstanding,” he says. ABB has developed its own multi-banking platform called Trade Finance Link with the help of a German software company called DOS. It does, however, use Bolero’s messaging service, which Gisler considers to be the best on the market. “Trade Finance Link together with Bolero’s messaging service allows us to have a leaner process, to have less paperwork, more speed and to more easily manage and allocate our credit lines and guarantees with greater flexibility.  “That flexibility also enables us to use banks where the pricing isn’t too high,” says Gisler.

“Trade Finance Link finished a pilot lasting from late September to late February and we sent 400 messages and received 900 through Bolero from the three banks participating in that pilot.”

Trade Finance Link is now being rolled out across ABB’s global operations with Bolero messaging. The implementation phase will take three years.