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BPO finds less traction with Tier 1 banks
More than three years since the seeds of the bank payments obligation (BPO) were planted by the International Chamber of Commerce (ICC) in partnership with SWIFT, adoption remains a challenge especially among the larger banks.
Daniel Yu 30 Sep 2014
More than three years since the seeds of the bank payments obligation (BPO) were planted by the International Chamber of Commerce (ICC) in partnership with SWIFT, the global messaging organization, adoption remains a challenge especially among the larger banks.
 
"BPO will not be led by the first-tier trade banks," admits Kah Chye Tan, chairman of the ICC Banking Commission at a forum at the annual Sibos in Boston. Banks from the OECD face issues relating to internal approvals and compliance, he says, which have made BPO harder to implement.
 
The larger banks also tend to want to hog both sides of the trade - imports and exports - making the adoption of BPO, which is a multi-bank payment process platform for trade finance, much less of an urgency. This is as opposed to how mid-tier and smaller banks view the value of BPO, notes Thomas Tan, senior managing director and head of transaction banking at Kuala Lumpur-based CIMB, which may be only at one leg of the trade. This also explains why banks in Asia have led the adoption of BPO globally with 13 banks from the region having gone live. "BPO needs more players," says Tan.
 
Banks also need to change their mindset. From one that is "what's in it for us" to aligning their interest with their customers, adds Vivek Gupta, global head of trade and supply chain at ANZ. "To have faster adoption of BPO, banks need to let go of the old thinking and focus on the larger opportunities."
 
Daisuke Kamai, head of e-trade product at Bank of Tokyo-Mitsubishi UFJ, one of the earliest adopters of BPO, says the bank has positioned its understanding of the BPO payment process to customers as "cutting edge". In doing so, it has been able to win business away from banks that do not as yet have the capability.
 
Especially in the face of a more challenging trade environment, the drop in commodity prices and the rise of China's domestic market, access to cash flow will increasingly become critical. Corporates therefore will need to be more insightful in the way they run the business and BPO may be one option to achieve a higher level of operational efficiency.
 
While BPO is sometimes seen as in competition with the use of letters of credit or open account for trade, ICC's Tan believes that this is marginal. Rather, banks should be looking at innovating around BPO solutions such as in pre or post-shipment finance.
 
Adoption of BPO will be a journey. A year ago, recalls Kamai, no one was talking about it. Today, he says that BTMU now has seven counter-parties. "It will have to start with gaining mind share that eventually translates to wallet share," reflects Gupta of ANZ. "So long as the early adopters execute well, it is a matter of time" when BPO as payment process will become more widely accepted.
 
 
 
 

    

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