Market adoption of MT798 Facilitating multi-banking in trade finance using SWIFT's industry standards for letters of credit and demand guarantees SWIFT's Trade and Supply Chain team supplychain@swift.com La Hulpe, June 21 th 2012
Agenda • Corporates, Banks and Solution Partners adopting the MT798 standards • Definition of Industry Standards • Industry standards enable competitive vendor solutions to interoperate • Best practices for multi-banking in trade and supply chain finance • Issues with proprietary formats and rulebooks • Issues for banks of non-standardised multi-bank options • Issues for corporates of non-standardised multi-bank options • Conclusion • Contact details Market adoption of the MT798 standards 2
Corporates adopting the MT798 standards Most are already using SWIFT for payments but this is not a pre-requisite Corporates Use of MT798 Use of Live Multi-bank for … MT798 as … Usage Solution Alcatel-Lucent Guarantees Exporter Live Surecomp Saudi Aramco Export LCs Exporter Live In-house ArcelorMittal Export LCs Exporter Live Misys International Metro Group Import LCs Importer Live In-house Buying Metsä Finance Export LCs Exporter Q4 2012 GlobalTrade Corporation Safran Guarantees, Exporter and Q4 2012 GlobalTrade LCs importer Corporation Voith Guarantees, Exporter and Q4 2012 Surecomp LCs importer More corporates will confirm their adoption of MT798 in H2 2012 Market adoption of the MT798 standards 3
24 banks adopting the MT798 standards 12 from the top20 Trade banks Market adoption of the MT798 standards 4
All leading Trade Finance vendors are accredited by SWIFT SWIFTReady for SWIFTReady Trade Corporates – Trade Finance Finance • Bank-to-bank standards • Corporate-to-bank standards • Corporate-to-bank Bank Corporates standards Vendor Trade Finance Vendor Trade Finance Solution Solution China Systems Eximbills GTC GlobalTrade Corporate CSI BankTrade Misys Misys Trade Portal Misys Trade Innovation Pinnacle Synergy Trade Services Plus Solutions (TS) Multi-bank Incorporated Corporate Site MIT CREDOC (PSI) Sopra Evolan IB Surecomp DOKA 5, IMEX Note: Surecomp is ready but not certified in 2011 Market adoption of the MT798 standards 5
Industry standards Developed by international standardisation bodies • Trade Finance instruments (UCP600, URDG758, ISP98, URC 522, URBPO, …) • MT standards (for L/Cs, Demand Guarantees, Collections) • ISO 20022 standards (for BPO) • ISO 9362 Business Identifier Code (BIC) • ISO Country codes, Currency codes, … Industry standards are industry-owned and technology-neutral. They offer a coherent legal and operational framework. Market adoption of the MT798 standards 6
Industry standards support end-to-end flows MT798 MT7XX MT798 ISO 20022 ISO 20022 ISO 20022 Internet Internet Buyers Issuing banks Advising / confirming banks Sellers Application, Inter-bank flows Advice, confirmation, amendment, … amendment, … 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 Market adoption of the MT798 standards 7
Industry standards enable competitive vendor solutions to interoperate MT798 MT7XX MT798 ISO 20022 ISO 20022 ISO 20022 Internet Internet Buyers Issuing banks Advising / confirming banks Sellers Application, Inter-bank flows Advice, confirmation, amendment, … amendment, … Message-level interoperability between various software solutions No vendor lock-in and vendor-specific process fees for banks Increased choice of vendor solutions (competitive space) Reduced technical, operational and legal costs Market adoption of the MT798 standards 8
Best practices for multi-banking in trade finance Rules • ICC Banking Commission's rules Messages • MT Cat4/7 standards • ISO 20022 TSMT standards Identity • Business Identifier Code (BIC or ISO 9362) for banks and corporates Channel • SWIFT for bank-to-bank (FIN and TSU) • SWIFT or Internet for corporate-to-bank Solutions • SWIFTReady vendors • In-house development Industry standards enable banks and corporates to increase efficiency and minimise costs when respecting all of the above best practices Market adoption of the MT798 standards 9
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 MT798 standards 10
Issues for banks with non standardised multi-bank options Scenarios: Corporate using a Corporate re- Corporate using a Corporate using MT798 vendor platform using its FI BIC vendor BIC and the standards with its own forcing banks to and the MT7xx MT798 standards BIC in SCORE adopt proprietary messages on the on the bank-to- Major issues formats, security bank-to-bank FIN bank FIN service for banks: and rules service Increased Additional fees for No fee for banks to re-use banks to pay to the vendor and SWIFT and SCORE for vendor; additional IT technical costs trade finance integration Additional vendor- Additional Increased Single trade-specific specific operational customer-specific operational process for all multi-bank processes for operational costs corporates limited number of practices for banks clients to develop Increased Parties need to Parties need to Parties need to Standardised SCORE develop vendor- develop corporate- develop vendor- legal agreement for cash and specific contractual specific contractual specific contractual complexity and trade arrangements arrangements arrangements costs Increased KYC Depends on vendor- Lack of visibility on Lack of full visibility Standardised SWIFT owned legal corporate identity, to end-corporate risks registration for corporates frameworks resulting with likely identity, resulting and re-use of BIC by KYC issues with likely KYC corporate issues Market adoption of the MT798 standards 11
Issues for corporates with non standardised multi-bank options Scenarios: Corporate using a Corporate re-using Corporate using a Corporate using MT798 vendor platform its FI BIC and the vendor BIC and standards with its own forcing banks to MT7xx messages the MT798 Major issues BIC in SCORE adopt proprietary on the bank-to- standards on the for formats, security bank FIN service bank-to-bank FIN corporates: and rules service Increased Need for multiple Proprietary Re-use SWIFT solutions when any development: so vendor and connectivity in use for of the banks packaged solutions technical costs treasury and cash required do not and costs cannot be management support the vendor shared platform Dependency on Not able to benefit Corporate does not Not following Single process with all single vendor from full MT798 benefit from industry banking partners solution: less functionality SWIFT's FIN standards and competition and Responsibility and best practices technical lock-in Liability (R&L) Increased Parties need to Parties need to Corporate cannot Standardised SCORE develop vendor- develop corporate- benefit from legal agreement for cash and specific contractual specific contractual standardised legal complexity and trade arrangements arrangements documentation costs Increased KYC Depends on vendor- Lack of visibility on Lack of full visibility Standardised SWIFT owned legal corporate identity, to corporate risks registration for corporates frameworks resulting with likely identity, resulting and re-use of BIC by KYC issues with likely KYC corporate issues 12
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 MT798; all leading vendors have adopted the MT798 • The MT798 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 MT798 industry standards to the trade finance market Avoid vendor lock-in by pushing back on proprietary portals/formats Market adoption of the MT798 standards 13
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