trade for corporates overview

Trade for Corporates Overview

Facilitating multi-banking solutions

in documentary trade finance using

SWIFTs MT 798 standards

SWIFTs Corporate and Supply Chain Markets team

June 2013

[email protected]

Join our LinkedIn group Supply Chain on SWIFT

Content

Rationale for MNCs to adopt multi-bank solutions in trade finance

Role of standardisation bodies

Portfolio of industry standards

Scope of SWIFTs MT 798 standards

Use of SWIFTs FIN and FileAct

Adoption by corporates, banks and vendors

Best practices for corporates

Future developments

Benefits

Training and Consulting Services

Conclusion

Contacts

2

SWIFT and your payments business

Trade Finance for Corporates

MNCs and multi-banking in

trade and supply chain finance

3

Corporate challenges with traditional trade

instruments (1/2)

Export documentary credit Difficult to manage advices of export L/Cs

and amendments received from multiple

banks in paper form and via different banks

portals

Internally, difficult to collaborate between treasury and various business units on L/C

allocation and preparation of documents

Lack of visibility of each step in the transaction process

Too many discrepancies, slowing down document compliance checking

Delayed receipt of payment

Import documentary credit Treasury lacks visibility to the allocation of

credit facilities to business units for import

L/C issuance

Lack of standardised approval process for import L/C issuance

Delays in import L/C issuance

No electronic global data base of import L/Cs for real time reporting of outstanding L/Cs.

Ideally by Business Unit, Bank, Product,

Counter Party

Difficult to link import L/Cs with export L/Cs for back to back transactions

Challenging to set up permanent and transactional alarms on key L/C dates

4

Corporate challenges with traditional trade

instruments (2/2)

Standby L/C and Demand Guarantee Management is decentralized and handled independently by each subsidiary

Difficult for central treasury to monitor the terms and the availability of Standby L/C and Guarantee facilities and improve the diversification of business allocation between the

banks

How to offer flexibility for subsidiaries but enforce standard policies moving forward?

Reconciliation of related data and settlement of fees is time consuming and prone to errors

Complex documentation management will result in increased charges

Transparency is not optimal and will result in differences between the banks and treasurys records

With different technology solutions, more challenging to on-board subsidiaries and banks

5

Rationale for MNCs to adopt multi-banking

solutions for trade finance

Digitise and automate

Consolidate information

Standardise bank

interface

Accelerate decisions

Improve control

6


Role of ICC, SWIFT and ISO

7

Industry standards Developed by international standardisation bodies

Industry standards are industry-owned and technology-neutral.

They offer a dependable legal and operational framework.

Trade Finance instruments (E.g. UCP 600, URDG 758, ISP98, URC 522, URBPO)

MT standards (for L/Cs, Demand Guarantees, Collections)

ISO 20022 standards (for BPOs)

ISO 9362 Business Identifier Code (BIC)

ISO Country codes, Currency codes,

8


Portfolio of Industry Standards


9

FIN MT 798

FIN MT 7xx

Buyers bank(s)

Seller

Sellers bank(s)

Buyer

1 2 3

Industry standards for L/Cs and Guarantees

1

SWIFT's MT 7xx are industry owned and technology

neutral standards in support of ICC's rules for L/Cs,

Standby L/Cs and Demand Guarantees

MT 798 Documents MT 798 Documents

UCP 600

URDG 758

ISP98

FileAct

MT 7XX

Industry standards for Bank Payment Obligation

11

2

Any channel /

any format /

any solution

Trade

Matching

Application

Any channel /

any format /

any solution

Seller Buyer

1 2 3

Bank

Payment

Obligation

Pu

blic

Do

ma

in

Co

mm

erc

ial

SWIFT's Trade Services Utility (TSU)

Any other inter-bank trade matching

application (TMA)

Bank portal SWIFT's SCORE Paper

Bank portal SWIFT's SCORE Paper

ISO 20022 mandatory

ISO 20022 optional

Industry standards support end-to-end flows

Streamline the L/C, Guarantees and open account trade transactions

Automate workflow of the trade life cycle to reduce cost

Accelerate handling of discrepancies and settlement

Move to paperless transaction processing

Enhance visibility on credit lines

Application,

amendment,

Advising / confirming banks Sellers

MT 798

ISO 20022

Advice, confirmation,

amendment,

MT 798

ISO 20022

MT 7XX

ISO 20022

12

Internet

Issuing banks Buyers

Internet

Inter-bank flows

Industry standards enable competitive vendor

solutions to interoperate

Business process-level interoperability between various software solutions

Increased choice of vendor solutions in competitive space

No need for banks to join multiple corporate portals

Reduced technical, operational and legal costs

No vendor lock-in

Application,

amendment,

Advising / confirming banks Sellers

MT 798

ISO 20022

Advice, confirmation,

amendment,

MT 798

ISO 20022

MT 7XX

ISO 20022

13

Internet

Issuing banks Buyers

Internet

Inter-bank flows


Scope of MT 798 standards


14

D I S C R E P A N C Y A D V I C E R E S P O N S E

Corporate-to-Bank

Import Documentary Credits

Bank-to-Corporate

IMP

OR

T D

OC

UM

EN

TA

RY

CR

ED

ITS

A M E N D M E N T N O T I F I C A T I O N

A M E N D M E N T A C C E P T A N C E N O T I F I C A T I O N

D I S C R E P A N C Y A D V I C E

C O M P L I A N C E A D V I C E N O T I F I C A T I O N

D I S C H A R G E A D V I C E N O T I F I C A T I O N

R E F U S A L A D V I C E N O T I F I C A T I O N

P A Y M E N T A D V I C E N O T I F I C A T I O N

I M P O R T P A Y M E N T S E T T L E M E N T A D V I C E

Applicant

A P P L I C A T I O N MT 798

MT 798

MT 798

I S S U A N C E N O T I F I C A T I O N MT 798

MT 798

MT 798

A M E N D M E N T R E Q U E S T MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

Bank

15

Corporate-to-Bank

Export Documentary Credits

Bank-to-Corporate

EX

PO

RT

DO

CU

ME

NTA

RY

CR

ED

ITS

A M E N D M E N T A D V I C E

A M E N D M E N T A C C E P T / R E F U S A L A D V I C E

A U T H O R I S A T I ON A D V I C E N O T I F I CA T I O N

C O M P L I A N C E A D V I C E N O T I F I C A T I O N

D I S C H A R G E A D V I C E N O T I F I C A T I O N

R E F U S A L A D V I C E N O T I F I C A T I O N

P A Y M E N T A D V I C E N O T I F I C A T I O N

T R A N S F E R R E Q U E S T

T R A N S F E R A D V I C E

E X P O R T P A Y M E N T S E T T L E M E N T A D V I C E

Beneficiary

C R E D I T A D V I C E

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

T H I R D B A N K A D V I C E MT 798

MT 798

MT 798

P R E S E N T A T I O N R E S P O N S E MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

Bank

16

Corporate-to-Bank

Bank-to-Corporate

Applicant

GU

AR

AN

TE

ES

/ S

TA

ND

BY

LE

TT

ER

S O

F C

RE

DIT

E X T E N D / P A Y R E S P O N S E

A P P L I C A T I O N

A M E N D M E N T N O T I F I C A T I O N

E X T E N D / P A Y Q U E R Y

C L A I M N O T I F I C A T I O N

C L A I M / C H A R G E S S E T T L E M E N T

R E D U C T I O N / R E L E A S E A D V I C E

N O T I F I C A T I O N

A M E N D M E N T R E Q U E S T

R E D U C T I O N / R E L E A S E R E Q U E S T

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

Bank Guarantees/Standby Letters of Credit

17

Corporate-to-Bank

Bank-to-Corporate

GU

AR

AN

TE

ES

/ S

TA

ND

BY

LE

TT

ER

S O

F C

RE

DIT

co

nt.

Beneficiary

A D V I C E

A M E N D M E N T A D V I C E

P A Y M E N T C L A I M

C L A I M A C K N O W L E D G E M E N T

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

Bank Guarantees/Standby Letters of Credit

18

Corporate-to-Bank

Bank-to-Corporate

C H A R G E S S E T T L E M E N T N O T I CE

Beneficiary

CO

MM

ON

GR

OU

P Corporate-to-Bank

Bank-to-Corporate

C H A R G E S S E T T L E M E N T N O T I CE

Applicant

MT 798

MT 798

F R E E F O R M A T

F R E E F O R M AT

C H A R G E S S E T T L E M E N T R E Q U E S T MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

C H A R G E S S E T T L E M E N T R E Q U E S T

F R E E F O R M AT

F R E E F O R M A T

MT 798

MT 798

MT 798

MT 798

MT 798

MT 798

Bank

Bank

19


Use of FIN and FileAct

20

Use of FIN and FileAct for C2B trade flows

(in Score)

Use of FIN Facilitates the exchange of

structured MT 798 messages

between banks and

corporates

Enables higher level of automation and back-office

integration

Specifications are instrument-specific (LCs, Standby LCs,

Demand Guarantees) and

define the vendor labeling

criteria.

Use of FileAct Facilitates the exchange of

electronic copies of documents

between banks and corporates

Any document type in any format:

Stand-by L/Cs & Guarantees:

Draft guarantee text

Scanned copy of the issued or received guarantee/amendment

Export L/Cs:

Commercial documents

Also supports ISO 20022 for BPO.

21

Use of FileAct request types

tsrv.xxx.lettersofcredit to group L/C messages with documents

tsrv.xxx.gteesstandbys to group Guarantee/Standby messages with documents

tsmt.xxx.tradedocuments for bills of lading, certificates of origin etc

tsrv.fin.mt7xx.lettersofcredit to group L/C FIN messages (+ documents)

tsrv.fin.mt7xx.gteesstandbys to group Guarantee/Standby FIN messages (+ documents)

22


Adoption of MT 798 standards


23

Corporates adopting the MT 798 standards Some are already using SWIFT for payments but this is not a pre-requisite

Corporates Use of

MT 798 for Use of

MT 798 as Live

Usage

Multi-bank

Solution

ArcelorMittal

International

Export LCs Exporter Live Misys

Alcatel-Lucent Guarantees Exporter Live Surecomp

Saudi Aramco Export LCs Exporter Live In-house

Metro Group

Buying

Import LCs Importer Live In-house

Mets Finance Export LCs Exporter Live GlobalTrade

Corporation

Reliance

Industries

Import LCs

Export LCs

Importer and

Exporter

2013 In-house

Safran Guarantees,

LCs

Importer and

Exporter

2013 GlobalTrade

Corporation

Voith Guarantees,

Export LCs

Importer and

Exporter

2013 Surecomp

24 Additional corporates are gradually

disclosing their adoption of MT 798

35 banks adopting the MT 798 standards 13 from the top20 Trade banks

25

Market adoption of the MT 798 standards

and more

Vendor Trade Finance

Solution

China Systems Eximbills Enterprise

CSI BankTrade

Misys Trade Innovation

Plus

MIT CREDOC

Sopra Evolan IB

Pinnacle

Solutions Inc.

(PSI)

Synergy Trade

Services (conformance statement)

Surecomp DOKA 5, IMEX

Vendor Trade Finance

Solution

China Systems Customer Enterprise

GTC @GlobalTrade

Corporate

Misys Misys Trade Portal

Pinnacle

Solutions

Incorporated

(PSI)

Synergy Trade

Services Corporate

Surecomp COR-TF

All leading Trade Finance vendors are

accredited by SWIFT (2012)

SWIFTReady Trade Finance

Bank-to-bank standards

Corporate-to-bank standards

SWIFTReady for Corporates Trade and Supply Chain

Finance

Corporate-to-bank standards

Bank Corporates

26


Best practices for multi-banking

27

Best practices for multi-banking in trade finance

28

Industry standards enable banks and corporates to increase efficiency and

minimise costs when respecting all of the above best practices

ICC Banking Commission's rules Rules

MT Cat4/7 standards ISO 20022 standards Messages

Business Identifier Code for banks and corporates (BIC or ISO 9362) Identity

SWIFT for bank-to-bank (FIN) SWIFT or Internet for corporate-to-bank Channel

SWIFTReady vendors In-house development Solutions

Issues with proprietary formats and rulebooks

Avoid proprietary solutions and vendor lock-in

Some Trade Finance vendors have been trying to impose their technology-specific formats and proprietary rulebooks in the C2B trade finance space

Their goal is to intermediate the corporate-to-bank contractual relationship, which is actually not necessary as their role is at technology level

They also wish to force banks into their systems using corporate pressure

Corporates and banks adopting such platforms are locked into the vendor-specific rules, formats and technologies

Software solutions should be independent of each other and interoperate using Industry Standards (as it is the case for payments)

Global Trade banks have resisted adopting those proprietary solutions as each implementation generates huge implementation and running costs (software,

legal, operational, technical); usually most fees are charged to the banks

whereas those solutions target the corporates

Using Industry Standards, any change of software solution performed by one party is not impacting the other party (technology independence).

Market adoption of the MT 798 standards 29

Issues for banks with non standardised multi-bank options


Scenarios:

Major issues

for banks:

Corporate using a

vendor platform

forcing banks to

adopt proprietary

formats, security

and rules

Corporate re-

using its FI BIC

and the MT7xx

messages on the

bank-to-bank FIN

service

Corporate using a

vendor BIC and the

MT798 standards

on the bank-to-

bank FIN service

Corporate using MT

798 standards with its

own BIC in SCORE

Increased

vendor and

technical costs

Additional fees for

banks to pay to the

vendor; additional IT

integration

No fee for banks to re-use

SWIFT and SCORE for

trade finance

Increased

operational

costs

Additional vendor-

specific operational

processes for

limited number of

clients

Additional

customer-specific

operational

practices for banks

to develop

Single trade-specific

process for all multi-bank

corporates

Increased

legal

complexity and

costs

Parties need to

develop vendor-

specific contractual

arrangements

Parties need to

develop corporate-


arrangements

Parties need to

develop vendor-


arrangements

Standardised SCORE

agreement for cash and

trade

Increased KYC

risks

Depends on vendor-

owned legal

frameworks

Lack of visibility on

corporate identity,

resulting with likely

KYC issues

Lack of full visibility

to end-corporate

identity, resulting

with likely KYC

issues

Standardised SWIFT

registration for corporates

and re-use of BIC by

corporate

Issues for corporates with non standardised multi-bank options

31

Scenarios:

Major issues

for

corporates:

Corporate using a

vendor platform

forcing banks to

adopt proprietary

formats, security

and rules

Corporate re-using

its FI BIC and the

MT7xx messages

on the bank-to-

bank FIN service

Corporate using a

vendor BIC and

the MT798

standards on the

bank-to-bank FIN

service

Corporate using MT

798 standards with its

own BIC in SCORE

Increased

vendor and

technical costs

Need for multiple

solutions when any

of the banks

required do not

support the vendor

platform

Proprietary

development: so

packaged solutions

and costs cannot be

shared

Re-use SWIFT

connectivity in use for

treasury and cash

management

Not following

industry

standards and

best practices

Dependency on

single vendor

solution: less

competition and

technical lock-in

Not able to benefit

from full MT798

functionality

Corporate does not

benefit from

SWIFT's FIN

Responsibility and

Liability (R&L)

Single process with all

banking partners

Increased

legal

complexity and

costs

Parties need to

develop vendor-


arrangements

Parties need to

develop corporate-


arrangements

Corporate cannot

benefit from

standardised legal

documentation

Standardised SCORE

agreement for cash and

trade

Increased KYC

risks

Depends on vendor-

owned legal

frameworks

Lack of visibility on

corporate identity,

resulting with likely

KYC issues

Lack of full visibility

to corporate

identity, resulting

with likely KYC

issues

Standardised SWIFT

registration for corporates

and re-use of BIC by

corporate Market adoption of the MT 798 standards

Next MT 798 features


32

Version 4 of MT 798 standards

General

Publication Jan 2013

Effective Nov 2013 (aligned with Standards Release 2013)

Incremental changes

Further clarification

Editorial corrections

Lead Bank Model

Addition of 3 optional fields at the end of every MT 798 Index Message Customer Identifier Processing Bank Identifier Lead Bank Identifier

33

Lead Bank Model Applicant side

34

Applicant Lead Bank

Processing Bank 1

Processing Bank 2

Processing Bank 3

Advising Bank 1

Advising Bank 2

Issuing Banks

Web GUI / Host-to-Host /

FIN / FileAct

Bank-to-Bank

MT 798

Bank-to-Bank

MT 7nn

Lead Bank Model Beneficiary side

35

Beneficiary

Lead Bank

Processing Bank 1

Processing Bank 2

Processing Bank 3

Issuing Bank 1

Issuing Bank 2

Advising Banks

Web GUI / Host-to-Host /

FIN / FileAct

Bank-to-Bank

MT 798

Bank-to-Bank

MT 7nn


Benefits

36

37

Benefits Corporates Banks

Consolidated Trade finance positions and increased visibility

Single multi-bank & multi-business channel

Dematerialization & standardization

Re-use bank-to-bank FIN MT7xx data fields with Corporates

Re-use of FileAct for any needed documents

to be included in the information flows

Overall cost reduction

Improved straight-through processing end-to-end

Improved overall transaction time

Only one interface development to integrate to Bank back

office (no need for vendor-specific interfaces, procedures,

contracts, formats)

Corporates and banks can make independent decisions

on technical platforms and implementations

Win-win benefits for corporates and banks

Training and Consulting

Services


38

Training and Consulting Services

On-site courses on MT 798 standards

SWIFT Consulting Services puts at your disposal a dedicated team of experts who provide extensive knowledge of financial

markets, message standards and back office integration

Our consultants can lead and support every phase of your project:

From assessment and analysis of your processes and needs

Design and implementation of the right solution

Support you through go live and maintenance following launch

Great asset if you decide to up-grade and integrate your in-house systems

39

40

Business

Technical

How to use SWIFT

data to get to strategic

insights?

Do you need help

with optimal usage of

Standards?

Do you have

Redundant & manual

interventions?

What is the right

sourcing model for

SWIFT infrastructure?

How to get to 5x9s operational

excellence?

How can you further

reduce your Cost of

Ownership?

Implementation

How to get to an easy

integration of your

applications & SWIFT

Who can guarantee

risk-free installations

and field services?

Can you provide me

peace of mind post

go live? Do y

ou n

eed k

now

ledge

able

and d

edic

ate

d

assis

tance d

uring y

our

SW

IFT

pro

jects

?

SWIFTs Consulting portfolio Common problems, unique solutions


Conclusion

41

Conclusion Multi-banking in trade finance is now a reality

All trade banks in the world use SWIFT's MT7xx standards with their correspondent banks

The leading trade finance banks are now extending the use of those standards to the corporate world through the MT 798; all

leading vendors have adopted the MT 798

The MT 798 can be used on any channel (Internet, SWIFT) and with any software solution; the SWIFTReady certification ensures

inter-operability between competitive vendor solutions

The growing adoption by all leading players confirms the immediate relevance of the MT 798 industry standards to the trade

finance market

42

Avoid vendor lock-in by pushing back on proprietary portals/formats

Contacts


43

Contact the MT 798 bank product teams


Banks adopting MT 798 Country MT 798 Product contact Bank of America US Paul Johnson

Banque Saudi Fransi SA Shafeek H. Al-Manameen

Bayerische Landesbank DE Florian Seitz

BHF Bank DE Edith Babuscio

BNP Paribas FR Eric Henry

BNY Mellon US Andres Ramos

Citibank US Fran Martell

CM CIC FR Tony Croizer

Commerzbank DE Sven Mueller

Crdit Agricole CIB FR Patrick Boiteau

Danske Bank DK John Enemark

Deutsche Bank DE Frank Bothe

Gulf International Bank SA Mathew Silva

HSBC HK Kate Han

ING NL Egbert Jansen

JP Morgan Chase US Merlin Dowse

KBC BE Karen Sterckx

LBBW Landesbank Baden Wrttemberg DE Rolf Seidel

Natixis FR Olivier Laborde

Nordea FI Soren Andresen

RBS US Deborah Seliski

Riyad Bank SA Medhat Sanuri

Samba SA Abdulkader A. Bazara

Socit Gnrale FR Corinne Bakok

Standard Chartered SG Ashutosh Kumar

The National Commercial Bank SA Omar Yassine

UBS AG CH Erwin Freiburghaus

Unicredit AT Markus Wohlgeschaffen

Contact our SWIFTReady Trade Finance

2012 partners

45

Partner Solution Contact

Joel Schrevens, Digby Bennett

[email protected]

[email protected]

+32 475 904413

Selene Chan, James Tindall

[email protected]

[email protected]

+ 44 7941 325716

Stphane Nouy

[email protected]

+33 (0)1 53 00 70 13

Jean-Luc Spinardi

[email protected]

+ 41 213 188 181

Marina Singlard

[email protected]

+33 5 6573 4651

Murray Freeman

[email protected]

+1 201 716 1236

Ralph Carbone

Pinnacle Solutions Inc.

[email protected]

Misys TI Plus

Evolan IB

DOKA 5, IMEX

Pinnacle

Solutions

Incorporated (PSI) Synergy Trade Services

Contact our SWIFTReady for Corporates -

Trade Finance 2012 partners

Partner Solution Contact

Jacob Katsman, Nick Pachnev

[email protected]

[email protected]

+1 416 627 8520 / +1 416 661 8520

Olivier Berthier, Stphane Nouy

[email protected]

+65 6416 4095

[email protected]

+33 (0)1 53 00 70 13

Ralph Carbone

Pinnacle Solutions Inc.

[email protected]

Murray Freeman

[email protected]

+1 201 716 1236

Misys Trade Portal

GlobalTrade Corporate

Pinnacle

Solutions

Incorporated (PSI)

Synergy Trade

Services (TS) Multi-bank

Corporate Site


COR-TF

47

Join our "Supply Chain on SWIFT" group on

Email us at [email protected] to register to our

frequent information mailings

Join our frequent Webinars

Market adoption of the MT 798 standards