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2011 Supply Chain Finance for Corporates webinars Questions and Answers
Version of December 2011 Page 1

A. Questions related to the presentation materials
QUESTION ANSWER DATE
A1 Can I have a copy of this presentation later? Copies of the presentation materials are circulated to those who attend
the webinars and then posted on our LinkedIn Supply Chain on SWIFT
Group. We also run repeat webinars for people who may not have been
able to attend first time.
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&
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A2 We are interested to become a participant member for
BPO (Bank Payment Obligations). How do we go forward?
As a bank you must first register to the SWIFT Trade Services Utility
(TSU). You can register on-line via www.swift.com .The registration fee
varies according to the global tier of the bank. Once registered, Swift will
assist your bank to go live. For further information please email us at
supplychain@swift.com .
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A3 What do you mean by (50EUR/Txn) lower rate of
investigation under operational benefits?
Operational savings will include a reduction in the number of
discrepancies thanks to an improvement in the matching rate that can be
achieved by electronic data presentation. By reducing the number of
discrepancies, banks and corporates will be able to reduce the
investigation effort, avoiding disputes, delays etc. Whilst the impact will
vary from business to business, the average savings are estimated at 50
EUR per transaction.
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A4 Can you explain the reasons behind the risk differential
between BPO & LC?
Essentially there should be no difference between the BPO and the L/C in
terms of the ability to mitigate risk. The main difference today is that the
L/C has an established and proven track record whereas the BPO remains
in its infancy. The absence of a track record today in some cases inhibits
the acceptability of a BPO. This will only be addressed by building
confidence over time through increased commercial adoption.
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B. Questions related to documentation
B1 Where can I find the BAFT-IFSA document in relation to
BPO?
In December 2010, BAFT-IFSA published a document related to standard
product definitions for open account trade processing and open account
trade finance (copy attached for reference purposes). The aim of the
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document was to promote the adoption of a common language. The
document does not explicitly reference BPO. SWIFT has taken those
BAFT-IFSA definitions and used them in relation to services that can
potentially be supported by BPO. Again this is all about promoting the
wider adoption of a common language.
B2 What SWIFT document includes the detailed description of
the BPO?
See the TSU Service Description (copy attached for reference purposes). 30/06/11
B3 Have you any example of an agreement between the bank
and its customer? For example : positive match = buyer
commits to pay the obligor's bank at the maturity date
SWIFT does not provide copies of bank documentation. However, the
TSU Service Description, chapter 8 (copy attached for reference
purposes) contains guidelines related to sample clauses that banks may
optionally wish to include in their customer agreements.
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B4 Can I find BPO documents on swift.com or ICC.com? You can access further information related to TSU & BPO on swift.com.
Please visit www.swift.com/trade_services_utility and/or join our
Supply Chain on SWIFT community on LinkedIn.
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B5 Is it possible to look through the main fields of the BPO? The documentation relating to the relevant tsmt messages can be
downloaded from the ISO web site www.iso20022.org. Go to the
catalogue of messages and find the tsmt messages. There is a PDF named
Message definition report. In the PDF look for a data structure named
PaymentObligation. This is the BPO data. It is in several messages, for
example in the InitialBaselineSubmission message (tsmt.019).
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B6 Where are the BPO rules available from now? Are they free
or for purchase?
See the TSU Service Description, chapter 7 (copy attached for reference
purposes). This document is now in the public domain, and available free
of charge.
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C. Questions related to costs/pricing
C1 What are the costs/expenses to be a TSU member? There is an annual subscription fee that depends on the global tier of the
institution. Details available from SWIFT on request. There is also a small
fee of 1.5 EUR/month for each live transaction. The fee is transaction
based not message based so an individual transaction may carry as many
messages as required at no additional cost. There is currently a
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promotional period in force until end 2012 during which time the
transaction processing fee has been reduced by 50% to 0.75 EUR/month.
C2 Will SWIFT charge its bank customers for each BPO
transaction? Presumably banks expect to charge fees to
their customers?
Yes. SWIFT normally charges its bank customers 1.5 EUR/month for each
live transaction. There is currently a promotion in force until end 2012
during which time this fee has been reduced by 50% to 0.75 EUR/month.
The banks will set their own tariffs when charging the corporate
customer. Those charges will vary from bank to bank.
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C3 How much cheaper do you expect the BPO to be compared
to the cost of LCs?
Product pricing is a matter for individual service providers to determine.
SWIFT cannot comment on this.
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C4 In term of costs, comparing BPO and LCs, do you agree that
the BPO transaction should cost less than LCs? Do you have
an idea about the costs for BPO vs. LCs?
In terms of processing, we believe the BPO should cost less than the LC
because of the level of automation e.g. no manual checking of
documents etc but again individual banks must determine their own
pricing policy based not only on processing costs but quality of service,
business benefits, product packaging etc.
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C5 How will BPO fees compare to unconfirmed documentary
L/C fees?
Each bank will set its own tariff. Charges will vary from bank to bank. 07/11/11

D. Questions related to standards
D1 Is there any standard type of SWIFT messages already set
up for BPO?
A set of ISO 20022 messages has been developed for the TSU and BPO.
The relevant ISO 20022 tsmt messaging standards and related
documentation are available on the iso20022 web site, page Catalogue
of ISO 20022 messages tsmt.001-052. Please follow the link
http://www.iso.org/UNIFI_trade_services_messages.page .
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D2 What message types and documents are supported in
BPO?
A set of ISO 20022 messages has been developed for the TSU and BPO.
The relevant ISO 20022 tsmt messaging standards and related
documentation are available on the iso20022 web site, page Catalogue
of ISO 20022 messages tsmt.001-052. Please follow the link
http://www.iso.org/UNIFI_trade_services_messages.page . The
documents supported as part of a TSU transaction are: purchase order,
commercial invoice, transport documents, insurance and certificates.
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D3 Why would anyone want to extend 20022 to overlap the
existing ANSI X12 (and EDIFACT) purchase order? Why not
translate 850 into TSU?
Users in different industries and operating in different geographies often
have different business requirements and preferences. This is all about
providing the user with choice. Translating 850 into ISO messages is also
an option to send to the TSU. No-one is forced to use one channel versus
another.
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D4 I recommend against promoting the "minimum trade data"
point, as banks must ask for more data than you
mentioned in order to meet compliance rules - esp. OFAC.
The minimum trade data point was developed because there was a
wrong perception in the market that TSU messages are always very
complex, while in fact the number of mandatory fields is very small. We
are simply getting across the limited amount of data that is mandatory in
the TSU. This does not prevent banks from including other data elements
as and when required in order to satisfy e.g. regulatory compliance.
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D5 Is this available in FIN MT? No. The TSU uses a separate set of XML ISO20022 messages. 30/06/11
D6 Will there be specific FIN MTs replacing the rule of MT
7nn?
If the question is about replacement of Category 7 common group
messages (792, 795, 796, 798, 799) by more specific MTs, no such
development is planned. This question is in any case outside the scope of
TSU/BPO which uses XML ISO20022 messaging standards.
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D7 Does BPO need MT7xx? Or is FIN messaging eliminated?
Does BPO substitute or complement MT7xx?
In order to use a BPO today banks must be subscribed to SWIFTs Trade
Services Utility (TSU). The TSU does not make use of FIN messages so
there is no need for MT7xx. The TSU uses a separate set of XML ISO20022
messages.
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D8 What exactly is agreed in the establishment of the
baseline?
The enforceability of a BPO ultimately depends upon the matching of
data. The establishment of the baseline will determine exactly what data
elements need to be matched in order for the BPO to be enforced. The
baseline will normally include information extracted from the purchase
order, details of the BPO (if any), payment terms and any other
processing requirements. For a complete description of the baseline, you
can download the documentation of the tsmt messages from the ISO
web site www.iso20022.org. Go to the catalogue of messages and find
the tsmt messages. There is a PDF named Message definition report. In
the PDF look for a data structure named Baseline e.g.
InitialBaselineSubmission message (tsmt.019).
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D9 Who decides the amount of data to be matched? The amount of data to be matched is determined by mutual agreement
between the involved banks and is the result of the baseline
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establishment process.
D10 Is there a pre-match status? Yes. It is possible to establish a pre-match status. Generally, after the
Trade Services Utility application compares data sets, it sends reports to
all of the involved banks notifying them of the results of the comparison
of the defined data elements. However, data sets can be submitted with
the instruction to pre-match, in which case only the submitting
financial institution will receive the results of the comparison. This is a
test. The status of the transaction does not change as the result of a pre-
match. Following a pre-match, data sets can be corrected if necessary.
The data set must be submitted with an instruction to match in order for
the transaction to progress.
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D11 Is there a limit to how much data can be uploaded e.g.
from insurance/certificates?
The Insurance data set contains a number of structured fields that can be
matched by the matching engine (TSU), for example the InsuredAmount
will be matched against the value of the goods shipped (from the
invoice). There are also optional repeating fields for insurance clauses, so
almost all of the insurance document could be input in the insurance
data set, and forwarded to the other banks. However, it should be noted
that it is not the purpose of the TSU to replace the current flow of
documents between the parties to a commercial transaction. Sending
text to the TSU and to other banks in the transaction is not the intention.
The TSU does not match the text fields. You can download the
documentation of the tsmt messages for the Insurance or Certificate data
set from the ISO web site www.iso20022.org. Go to the catalogue of
messages and find the tsmt messages. There is a PDF named Message
definition report. In the PDF look for a data structure named
CertificateDataSet or InsuranceDataSet. You can find it in several
messages, for example in the DataSetSubmission message (tsmt.014)
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D12 Are there plans to standardise the required C2B
communications under ISO 20022?
Yes. The same messages that are used for bank to bank communication
(via the TSU) can also be used for corporate-to-bank messaging.
Guidelines have been developed for this purpose and are available for
viewing at http://www.swift.com/corporates/resource.htm
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D13 Do carriers need to comply with the ISO 20022 tsmt
messaging format for Bills of Lading in order to feed the
Carriers may wish to implement ISO 20022 tsmt to deliver Bills of Lading
data to the banks. The banks will be required to transform such incoming
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TSU/BPO process? data flows into ISO 20022 tsmt in order to deliver the transport data set
to the TSU. For details of what the data set message look like, please visit
the ISO web site at www.iso20022.org , go to the catalogue of messages
and find the tsmt messages. There is a PDF named Message definition
report. Here you can see how the transport data set format compares
with alternative forms of B/L.
D14 In a case where the LC requires groundnuts but the China
certificate of origin says peanuts, both groundnuts and
peanuts refer to one and the same thing. In BPO this
would be a valid discrepancy. How would BPO solve this
problem?
In such a case, the TSU would generate a mismatch report. On receipt of
this report the banks have the option to accept the mismatch. In other
words, they can immediately say, yes the data does not match but I do
not care. Carry on. The discrepancy can be resolved almost immediately.
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D15 What type of requirements are there to satisfy the
baseline?
The baseline contains some minimum mandatory elements that must be
matched. These include essential data such as amounts, dates,
counterparty names etc Other data elements may be entered optionally
in those cases where a more detailed matching process may be required.
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E. Questions related to legal framework
E1 Can you explain exactly what is meant by "ICC
endorsement of BPO"?
An ICC BPO Working Group has been officially established with a view to
recognising the BPO as an accepted market practice in much the same
way as the LC has become an accepted market practice with the support
of UCP. There are three main workstreams; legal framework, education
and commercialisation. The BPO adoption process will eventually result
in the publication by the ICC of a set of rules governing the usage of the
BPO (similar to but much shorter/simpler than UCP). The only material
difference between ICC rules and SWIFT rules is that SWIFT rules are TSU-
specific whereas ICC rules will eventually support market adoption of the
BPO regardless of any underlying technology.
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E2 Is there an internationally accepted standard for the BPO
e.g. similar to UCP 600? Or does the legal enforceability of
the concept need to be checked in each jurisdiction?
The equivalent of UCP 600 for L/C in the case of the BPO is a set of rules
available in chapter 7 of the TSU Service Description (copy attached for
reference purposes). The legal validity and enforceability of the BPO
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under Belgian law has been independently examined and confirmed by a
law firm, Allen & Overy in 2008. A copy of this legal opinion is available
on request. In common with well established market practice, the BPO
Rulebook does allow participating banks the freedom to agree on the
choice of applicable law.
E3 Is there any international process standard to support BPO,
such as UCP600 to the letter of credit? If yes, can you
describe the brief content or its work plan?
The equivalent of UCP 600 for L/Cs in the case of the BPO is a set of rules
available in chapter 7 of the TSU Service Description (copy attached for
reference purposes).
30/06/11
E4 What is the time period for ICC adoption of the TSU rule
book? What is the status of the ICC rules for the BPO?
The ICC Banking Commission has developed a plan to adapt and adopt
the existing BPO Rulebook which currently forms part of the SWIFT TSU
Service Description. A dedicated working group has been set up to
execute that mission. It is anticipated that the ICC BPO rules will be
officially published by the ICC Banking Commission in Q1 2013. These
rules will be technology-independent. The only material changes that
need to be made relate to the availability of the BPO through alternative
technology platforms i.e. de-coupling the BPO from the mandatory use of
the TSU.
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&
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E5 If you look at reverse factoring: how does the BPO solution
help banks to overcome legal issues regarding the validity
of the purchase of invoices?
The issuance of a BPO is not dependent upon the purchase of invoices. It
is an individual bank decision how to collateralise its exposure.
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E6 Does the ICC recognize BPO as a legally binding
instrument?
The BPO is a legally binding instrument as per the TSU Service
Description. It is not the ICCs role to give the BPO legal recognition. The
ICC is a private international organization. It is not a governmental body
and therefore it does not make laws as such. It is the role of the ICC to
make available a set of contractual rules that will serve to establish
uniformity of practice so that practitioners do not have to cope with a
plethora of conflicting national regulations. The universal acceptance of
the UCP is a testament to the success of the ICC in establishing such rules
for the adoption of the L/C. It is envisaged that the ICC will make
available a similar set of rules that will enable the BPO to obtain universal
acceptance. However, the BPO is already a legally binding instrument.
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E7 In terms of risk mitigation, do you agree that there is no
difference between BPO and L/C?
Both the L/C and the BPO can be used (a) as a means of mitigating risk (b)
providing the exporter with an assurance of payment and (c) as a form of
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collateral for financing. The main difference today is that the L/C has a
long established track record of usage with proven reliability in the case
of dispute resolution. Relatively speaking, the BPO is still in its infancy.
E8 It is not clear to me who in the chain of the banks
guarantees the correctness of the shipment of the goods
as is the case in an export L/C where the exporter's bank
verifies the truth and validity of the shipping docs.
According to the TSU Rulebook a financial institution assumes no liability
or responsibility for the accuracy, genuineness, validity or legal effect of
any data received from its customer or any other party. However, a
financial institution must ensure that the data it submits to the Trade
Services Utility application accurately reflects the data and information it
received. In the case of a L/C, the bank does not verify the truth of the
documents. It checks that the documents are compliant on their face.
Under a BPO, the banks responsibilities are much the same.
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E9 Under a BPO, the shipping documents are despatched
directly by the seller to the buyer. How will the buyer be
assured that the seller has shipped the goods in
compliance with the purchase order? How does a BPO
ensure that the electronic data exchanged is in line with
the actual shipping documents?
The TSU supports the matching of data taken from the commercial
invoice and transport documents to that established under the original
purchase order. With a BPO, the relevant data can be extracted from the
underlying transport documents and input into the TSU for matching. As
with a L/C there is no way of checking beyond all doubt that the goods
shipped are in line with what is described in the documents.
30/06/11
E10 What is the current status of BPO legal standing? The validity and enforceability of the BPO under Belgian law has been
independently examined and confirmed by a law firm, Allen & Overy in
2008. A copy of this legal opinion is available on request . Under the BPO
Rulebook, banks are allowed to agree on a different applicable law. For
such other jurisdictions, banks may wish to seek their own legal advice on
the equivalent validity and enforceability of a BPO.

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E11 Does the Sellers Bank have an obligation to pay, or only
the Buyers Bank?
Under a BPO, the Obligor Bank (which is often but not always the Buyers
Bank) carries the obligation to pay the BPO Recipient Bank (which is
always the Sellers Bank). The obligation of the Sellers Bank to pay the
seller is outside the direct scope of the BPO and will be covered
separately in the related agreement between the bank and the customer.

07/11/11
E12 If the Buyers Bank does not perform in a timely manner, is
there an obligation on the part of the Sellers Bank to pay
the seller? If the Buyers Bank goes bankrupt, would the
No. The BPO relates only to the obligation of the Obligor Bank (often but
not always the Buyers Bank) to pay the BPO Recipient Bank (always the
Sellers Bank). However, under the service agreement between the
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Sellers Bank be obligated? Sellers Bank (BPO Recipient Bank) and the seller, the former may have
taken on certain commitments which go beyond the BPO rules.
E13 If the buyer does not pay, who is responsible to pay the
seller? Obligor Bank or Recipient Bank?
The only obligation arising from a BPO is that of the BPO Obligor Bank to
pay the BPO Recipient Bank. The obligation of the BPO Recipient Bank to
pay the seller as ultimate beneficiary will be covered in the underlying
agreement between bank and customer.

07/11/11
E14 If the Obligor Bank does not pay, is there any payment
obligation from the BPO Recipient Bank to pay the seller?
No. The only obligation arising from a BPO is that of the BPO Obligor
Bank to pay the BPO Recipient Bank. The obligation of the BPO Recipient
Bank (Sellers Bank) to pay the seller is outside the direct scope of the
BPO and will be covered separately in the related agreement between
the bank and the customer.

07/11/11
E15 BPOs seem to be tied to individual transactions, similar to
documentary L/Cs. Alternatively, could BPOs be provided
which act in a way similar to Standby L/Cs?
No. BPOs are primary payment obligations linked to individual
transactions. In this respect, they are similar in nature to commercial
letters of credit and not standby L/Cs.

07/11/11
E16 Do providers of 3
rd
party documents such as bills of lading
need to agree to the BPO format?
In some cases a primary bank e.g. the Sellers Bank may wish to invite
another bank (or branch of the same bank) to submit data sets (such as
transport data) on its behalf. In this case, the other bank/branch will
assume the role of a Submitting Bank and will be party to the transaction.
As such, the Submitting Bank must explicitly accept its role and
responsibilities in accordance with the terms of the established baseline
which includes the BPO. However, in the case of a baseline amendment a
Submitting Bank is not required to accept such amendments.

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E17 If mismatches are not agreed or cleared when will the BPO
expire?
If mismatches are not agreed i.e. are explicitly rejected, then no payment
is due. Data will have to be re-submitted. If no response is provided by
the party that must accept or reject the mismatches, the TSU matching
engine will consider that the mismatches have been implicitly rejected
after a specified timeout. In any case, and independently of the above,
the BPO will always contain an expiry date. Any amount due under a BPO
for which conditions have not been met is no longer available after
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23:59:59 UTC on the expiry date in the established baseline.

E18 How are disputes between buyers and sellers handled?
What if there are disputes after payment has been
executed?
Disputes between buyers and sellers are outside the scope of the BPO.
The BPO is a bank to bank obligation only.
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E19 How would a BPO prevent the shipment of rubbish or no
goods at all? Hackers may create a fake e-bill of lading or e-
air waybill. How would the BPO prevent this?
The BPO does not of itself prevent fraud. Banks submitting data to the
TSU are under a duty of care to ensure that the data is complete and
accurate and is consistent with the underlying documentation related to
the shipment. This does not altogether eliminate the risk of fraud. Banks
will be required to carry out the same KYC/compliance checks as now.

07/11/11
E20 How would the BPO handle the sanctions clauses that are
so common in L/Cs nowadays?
Sanctions screening must be performed on all BPO/TSU transactions. This
is outside the direct scope of the TSU matching engine and should form
part of the banks standard operating procedures. All parties to a
BPO/TSU transaction will have access to the same level of information for
screening purposes. Furthermore, each bank should take a view as to
how it wants to behave towards sanctions clauses in contracts.
07/11/11
E21 Is BPO going to replace eUCP? How would you position
BPO versus eUCP? Is there any intention to integrate?
The construction of the ICC BPO rules will include a cross-reference to
elements of both UCP and eUCP in order to ensure consistency. It is
possible that some clauses from the eUCP may be integrated with the ICC
BPO rules. However, the scope of the two sets of rules is different. The
eUCP is a supplement to UCP designed to accommodate the presentation
of electronic records (e.g. scanned images) under a letter of credit. The
eUCP will continue to exist in its own right alongside ICC BPO rules. An
additional advantage of the BPO is that it is underpinned by ISO 20022
messaging standards enabling fully automated data processing.
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E22 What is the difference between a BPO and a L/C using
eUCP? How can transport documents like a bill of lading
be handled under BPO?
The letter of credit and the BPO represent two alternative methods of
payment. Where a letter of credit allows the presentation of electronic
records the related terms of payment will be governed by eUCP as a
supplement to UCP. If a BPO is used, the related terms of payment will be
governed by the ICC BPO rules. In this case, the proposition is enhanced
by the automated matching of data. Transport documents like bills of
lading will provide a source of such data to populate the fields that are
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included in the transport data set. The information in the transport data
set is matched against information in the baseline and other data sets. In
this case, the transport (routing) information in the transport data set is
matched against the corresponding transport (routing) information in the
baseline.
E23 To what extent and where do you see a risk of fraud in
TSU/BPO?
The risk of fraud exists no matter what the method of payment may be.
The best protection against fraud in all cases will be KYC. Just as a bank
deals in documents under a L/C, so a bank deals in data extracted from
those same documents under a BPO. If the documents are false, the data
will be false. In neither case would a bank concern itself with the
underlying goods.
07/11/11
E24 Is the handling of mismatches in BPOs comparable to the
handling of discrepancies in L/Cs? Or are these subject to
technical/non-documentary mismatching? Who is judging
what is a mismatch? In LCs, guidance on discrepancy
handling is given under UCP 600 and ISBP.
A mismatch in the TSU is comparable to a discrepancy in a L/C. In both
cases, the information presented is inconsistent with what is expected.
In the case of the TSU/BPO data is matched automatically. The result is
instant and very clear. Either the data matches or it does not. If there is a
mismatch the involved banks are given the opportunity to accept or
reject the mismatch. If the mismatch is accepted the transaction can
continue unabated. If the mismatch is rejected then data must be re-
submitted in order to obtain an acceptable match.
07/11/11
E25 How are discrepancies handled in the BPO process?
Please contrast with how discrepancies are handled in the
L/C process.
A discrepancy in a L/C is handled as a mismatch in a BPO. In both cases,
the information presented is inconsistent with what is expected. In the
case of the TSU/BPO data is matched automatically. The result is instant
and very clear. Either the data matches or it does not. If there is a
mismatch the involved banks are given the opportunity to accept or
reject the mismatch. If the mismatch is accepted the transaction can
continue unabated. If the mismatch is rejected then data must be re-
submitted in order to obtain an acceptable match. The automated
matching process removes the subjectivity commonly associated with
manual processing, hence reducing the risk of delays, disputes etc.
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E26 Is it always necessary to have an agreement between
banks?
All banks participating to a BPO/TSU transaction must subscribe to the
TSU service and in so doing accept the terms set out in the TSU Service
Description. The establishment of a baseline represents the agreement
between banks for any given transaction. There is no need for bilateral
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agreements to be negotiated separately between banks. The TSU Service
Description which includes the Rulebook is a multilateral contract
between all participants.
E27 It seems that the bank issuing the BPO may itself be a risk.
Under L/C, we can use a confirmation to cover such risk. Is
there a similar approach available here?
The BPO is a bank to bank obligation. As such a BPO Recipient Bank may
be taking on the risk that the BPO Obligor Bank does not pay. Since the
BPO is bank to bank only the BPO cannot be confirmed in the same way
as a L/C can be confirmed. However, the exact terms of payment would
normally be covered in the Bank/Customer Agreement. This means in
effect that in all cases that the sellers own bank (which is always the BPO
Recipient Bank) will be the bank that confirms payment to the seller.
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E28 Can a BPO be transferred or assigned like LCs? No. A BPO is a bank-to-bank obligation. As such, payment will be made
from a BPO Obligor Bank (often but not always the Buyers Bank) to a
BPO Recipient Bank (always the Sellers Bank). The Seller may instruct the
BPO Recipient Bank separately to execute payment in favour of a third
party assignee who may have been responsible for the actual delivery of
goods.
08/09/11
E29 What is the role of the recipient bank, a nominated bank or
a confirming bank in UCP 600 context?
1) The BPO Recipient Bank is always the Sellers Bank and will always
be the beneficiary of the BPO.
2) Physical documents are not presented to the bank so the role of
a nominated bank does not apply. It is possible for a bank other
than the Buyers Bank to act as the BPO Obligor Bank. It is also
possible for a bank other than the Sellers Bank to act as a
Submitting Bank (submitting data on behalf of the Sellers Bank).
3) A BPO is a bank-to-bank obligation. The BPO Recipient Bank
which is always the Sellers Bank will always take on the role of
confirming payment to the seller in a separate Customer
Agreement.
08/09/11
E30 What is the maximum number of days for advice of non
compliance from paying bank to recipient bank and from
recipient bank to seller?
BPO rules only refer to terms between banks i.e. the BPO Obligor Bank(s)
and the BPO Recipient Bank. It is the TSU that will generate the match
report indicating whether a data set matches (i.e. is compliant) or not. In
case of non-compliance, i.e. data mismatches, the BPO Recipient Bank
(which is always the Sellers Bank) and the BPO Obligor bank (if it is the
Buyers Bank) are informed at exactly the same time. The Buyers Bank
08/09/11

then has to accept or reject the mismatches. As soon as they reject or
accept, the Sellers Bank will be informed. If they do not accept or reject,
the TSU will send action reminder messages every 7 days until the
situation is resolved, or the transaction is closed for inactivity (under the
life time expiry timeout). Terms between BPO Recipient Bank and seller
will be included in the bank/customer agreement which is outside the
direct scope of the TSU/BPO rules.
E31 In the BPO Rule book, is there anything like preclusion
provisions as in UCP 600?
Article 16f of UCP precludes a L/C issuing bank from claiming that
documents are not compliant if that bank fails to act in accordance with
the provisions of the Article. There is no parallel situation with BPO since
data is presented and matched electronically. Discrepancies are
represented as mismatches which can be accepted or rejected
automatically. A BPO Obligor Bank cannot refuse to honour a BPO when
the data presented matches i.e. it is compliant with the terms of the BPO.
So it is automatically precluded from claiming non-compliance.
08/09/11
E32 Is there any amendment in BPO as in UCP 600? Yes. The BPO forms an optional part of a TSU baseline. It is, possible to
amend a BPO in an established baseline provided the involved banks
agree. In the case of multiple obligor banks, each bank just affirm its
continued role in light of the amendment.
08/09/11
E33 Is it necessary for the seller to confirm acceptance of the
amendment before presentation or there is no such need
until presentation of data from seller, working like UCP
600?
The seller is not a direct party to the BPO. It is the Sellers Bank that must
accept any amendments on behalf of the seller.
08/09/11
E34 Is BPO bank-to-bank reimbursement under URR525 or
adapted version thereof?
In a single TSU transaction it is possible to have multiple BPOs issued by
multiple BPO Obligor Banks. Each BPO is the obligation of one Obligor
Bank only. The Buyers Bank does not have to be an Obligor Bank. If
multiple obligor banks are involved, the amount due by each is
proportional to its share of the total of all BPO amounts. The role of a
reimbursing bank does not apply in the sense that one BPO Obligor Bank
would be obliged to pay if another BPO Obligor Bank failed to do so.
08/09/11
E35 Could I get a copy of the current BPO rules? Will the ICC be
changing the rules or will they be exactly as they are now?
The current BPO rules are included in Section 7 of the TSU Service
Description. The ICC version of the rules will be entirely consistent
though not completely identical to the existing rules. The main change is
07/11/11

that the ICC rules will be industry-owned and therefore technology-
neutral. In other words, all direct references to the TSU will be removed
so that in theory at least it would become technically possible to transact
a BPO across an alternative technology platform.

F. Questions related to accounting policy & capital treatment
F1 Is the BPO an off-balance sheet solution for the sellers? From an accounting perspective, the BPO should be treated in a manner
similar to a letter of credit. Whether the BPO has to be reported on or off
balance sheet will depend on its economic substance during its lifecycle
and the uncertainty levels in terms of causality, timing and valuation of
the obligation. The BPO constitutes a definite undertaking of the issuing
bank, provided that the stipulated data is presented in accordance with
the agreed BPO rules. At the time of confirming its role, the issuing bank
(usually the importer/buyers bank) will record the BPO as a contingent
liability in the off-balance sheet notes. Subject to the agreement made
between the issuing bank and the importer/buyer, the importer/buyer is
likely to mark a direct liability whilst a confirmed BPO would represent
an asset to be reported in the balance sheet of the exporter/seller. Once
the submitted BPO information is compliant and no discrepancies have
been found, the obligation of the issuing bank becomes a direct liability.
If an acceptance is discounted, the exposure becomes a cash item
recorded as a loan/advance with recourse to the corporate. From that
point on, the importer/buyer would report the BPO as an off-balance
sheet liability in the notes. At this point it moves from being an unfunded
obligation to an actual funded obligation for the issuing bank, and from a
funded obligation to an unfunded obligation for the importer/ buyer.
30/06/11
F2 What is the balance sheet treatment for the buyer when
getting BPO issued? Is it non-funded bank borrowing?
See answer to question F1 30/06/11
F3 Accounting: is BPO an off balance sheet instrument? See answer to question F1 30/06/11
F4 Regarding regulatory impact, as documentation has Since the BPO today has no track record of usage, it is difficult to predict 30/06/11

dematerialized for open account & supply chain financing,
have you seen any trend emerging in keeping regulators
comfortable? For example, lack of B/L's would not provide
sight into potential violations.
the approach of regulators. The electronic data submitted as part of the
TSU/BPO transaction will contain all relevant information extracted from
the underlying transport documents etc and should therefore constitute
a sound basis for regulatory reporting, if required. At the same time,
actual documents can still be exchanged physically or electronically, in
parallel to the BPO data exchange.
F5 With the capital treatment of the BPO being treated the
same as a commercial letter of credit by most banks, how
do you see the BPO as being a much cheaper alternative to
the L/C?
We expect the capital treatment of the BPO to be the same as that of a
commercial letter of credit. Whilst the capital costs for the BPO and letter
of credit would be similar, we expect the processing costs for the BPO to
be significantly cheaper than for letter of credit, thanks to the electronic
data presentation and matching.
30/06/11
F6 US Importers must report Letter of Credit liabilities on their
Balance Sheets as a type of "debt". How will Importers
account for BPOs?
See answer to question F1 30/06/11

G. Questions related to usage
G1 What is the development need on the bank's side? Banks will typically start by processing limited volumes on a semi-manual,
semi-automated basis using a free piece of standalone software, the TSU-
Interface, supplied by SWIFT. Over time and once the business case has
been made, banks would normally want to invest in back office
integration in order to automate the workflow in support of enhanced
STP. The size and effort of such a development project will vary from
bank to bank. It may be done in-house or by licensing software from an
accredited vendor such as Misys, China Systems, CSI Banktrade or ACI.
30/06/11
G2 Can it work on a manual basis for a limited number of
transactions?
Yes. Banks will typically start by processing limited volumes on a semi-
manual, semi-automated basis using a free piece of standalone software,
the TSU-Interface, supplied by SWIFT.
30/06/11
G3 Is BPO part of the SCORE or MA-CUG proposition? The BPO is a bank to bank obligation which is offered as part of a bank to
bank service, currently available via a bank to bank application called the
Trade Services Utility (TSU). So the short answer to the question is no
30/06/11

since SCORE/MA-CUG relates to corporate to bank communications over
SWIFT. In the case of BPO, the corporate does not have to be ASWIFT
user. However, the corporate-to-bank flows related to BPO transactions
could be transacted by banks and corporates on SCORE or within MA-
CUGs if that is their preference. The files can be structured in any format
between banks and their customers. SWIFT developed some guidelines
enabling corporates to make use of the same ISO 20022 messaging
standards as are used by the banks in the TSU. Those messages could
optionally be delivered to the bank in standard format e.g. via SCORE.
Those guidelines are available for viewing at
http://www.swift.com/corporates/resource.htm

G4 Does BPO include the credit documents collection? The TSU deals in data not documents. A BPO is an optional block of data
incorporated in a TSU message called the baseline. The block of data
specifies the matching conditions that must be met in order for the BPO
to be enforced.
30/06/11
G5 Are all the documents e.g. Bill of Lading etc electronic in
BPO?
The TSU deals in data not documents. Relevant data elements are
extracted from the underlying documents and mapped into standardised
data sets including commercial, transport, insurance and certificates.
Documents may still be exchanged physically or electronically as required
outside the TSU.
30/06/11
G6 How many banks are supporting BPO today? There are currently around 90 banks in 31 countries subscribed to the
TSU (see attached).
30/06/11
G7 My understanding for BPO is that both buyer bank and
seller bank should enrol to this service. What is the existing
bank footprint supporting this?
Yes, both buyers bank and sellers bank must be enrolled to the TSU. See
attached document for a summary of banks currently subscribed.
30/06/11
G8 Is there any provision for the number of BPOs in, say,2012? No. We expect volumes to evolve as market awareness grows. 30/06/11
G9 If document matching will be at a minimum it means that
there will be no place for discrepancies like the old L/C's?
So if the POs are matched and quality & quantity of goods
match, what if certain documents to be presented under
the BPO are not presented as required? Will it be a
discrepancy?
A transaction is established in the TSU through the matching of data
taken from the PO. This is called a baseline. Within the baseline, there is
an option to include a BPO and the terms and conditions that need to be
met in order for that BPO to be enforced. If data is not presented in
accordance with the terms specified in the baseline, the issuing bank can
either decide to accept the mismatches (discrepancies) or reject the
30/06/11

mismatches in which case the BPO is not enforceable. The simplicity is
that the checking of data can be limited to those elements that are
directly relevant to the decision-making process and that in a data
matching process, either there is a match or a mismatch, thus removing
the subjectivity associated with manual processing.
G10 What happens if data are not fully compliant? Can the
obligor raise discrepancies?
If the data is not fully compliant it will result in a mismatch which can
either be accepted or rejected by the Obligor Bank.
30/06/11
G11 From the answer I am hearing, there is a RMA/Key
exchange required to establish bank to bank BPO
relationship?
No. TSU banks do not communicate with each other directly but via the
TSU application which sits on the SWIFT network. Consequently, no RMA
keys have to be exchanged between the banks. The BPO is established as
part of a transaction in the TSU. It can optionally be included in the TSU
baseline at the start of the transaction or added at a later stage during
the transaction lifecycle.
30/06/11
G12 What is the minimum number of operations to be handled
to subscribe to this service?
There are no minimum/maximum limitations. Some users have low
volumes of high value transactions whilst others have higher volumes of
typically lower value transactions.
30/06/11
G13 Could you advise the names of the participating banks? The list of participating banks is attached for reference purposes. 30/06/11
G14 Can a corporate act like a bank in BPO (TSU?) and do for
example pre-financing with their suppliers?
The TSU is a bank to bank application. It is only accessible to banks acting
on behalf of their corporate customers. The bank can engage in pre-
shipment finance on behalf of its customer.

30/06/11
G15 I would like to know how you see the BPO processing
procedures, compared to LCs. When you have a
transaction on at sight basis and the documents will take
about one week to be received by the buyer, for example?
Will the payment be processed anyway?
Data processed via the TSU will specify terms and conditions for payment
including the due date. The payment does not have to be processed
unless/until the specified terms and conditions have been met. There is
not really any difference here compared to L/C except of course that the
data will be made available electronically.

30/06/11
G16 I still see unclear why the importer would commit to the
payment of a PO (which can be cancelled, supplier may not
perform, etc.). How could I convince the importer of the
advantages of confirming the PO?
It is a business decision as to whether the confirmation of a purchase
order represents sufficient grounds to support a proposition for pre-
shipment finance. This is typically regarded as higher risk than an offer of
post-shipment finance based on a confirmed invoice. In some cases the
importer may wish to support the suppliers short-term working capital
financing needs in order to secure the supply chain. It is all a matter of
30/06/11

risk management.

G17 Will there be an open list of participating banks? The list of participating banks is attached for reference purposes. 30/06/11
G18 In post shipment SCF, the credit is offered to suppliers by
the buyer's bank based on the buyer's credit rating. This is
how the supplier gets financing at a much cheaper rate
that what they would get from their local bank. How do we
provide this benefit under the BPO model where you
encourage the supplier to work with its own bank?
Its true that we are talking here about a 4-corner versus 3-corner model.
Often there will be instances where a Buyers Bank cannot fully
implement a 3-corner approach because of limited reach so the 4-corner
is needed in order to facilitate a complete service. In such cases, the BPO
is issued by the Buyers Bank (or possibly by a third party bank) in favour
of the Sellers Bank. Therefore, in financing the seller the Sellers Bank is
relying on receiving payment from the BPO Issuing Bank provided of
course the seller can fulfil its contractual obligations. If this is treated as a
bank risk (i.e. the risk is on the BPO Issuing Bank) it can have a positive
influence on the Sellers Banks pricing model. In some cases, the
financing proposition may rely on some form of collaboration between
the BPO issuing Bank and BPO Recipient Bank.

30/06/11
G19 I am a seller. If I wanted to ask a buyer to commence using
BPO versus L/C, what are the key features of a BPO which
would make it attractive to the buyer to use the BPO
versus an unconfirmed L/C i.e. how do costs compare etc?
Commercial pricing of competitive offerings is a matter for the banks to
decide. It will vary from bank to bank. If you are a seller, the BPO
discussion with your customers is likely to revolve around processing
efficiency. For example, physical documents will not be required to pass
through the banking system as they do today under a L/C. Data
matching is performed electronically reducing the related risks of
discrepancies, disputes, delays, demurrage charges etc.
07/11/11
G20 Unlike a conventional L/C arrangement, is it correct that no
documents will be sent to the banks?
Correct. No physical documents are required to be routed through the
banking system. With a BPO, the banks deal in data, not documents.
07/11/11
G21 Must a BPO always start from a PO or can it start from an
Invoice?
The TSU/BPO transaction always starts with the establishment of a
baseline i.e. an agreed position that is shared between the involved
banks. Most of the time, a baseline would be established using data
taken from the PO. However, it is technically possible to establish a
baseline using data taken from the commercial invoice.
07/11/11
G22 Is Bolero planning to get a BPO certificate? Bolero is not a registered software partner of Swift. Today, Swift is not
aware of any plans Bolero may have regarding the BPO. If Bolero would
wish to become BPO-certified they would first need to join the Swift
07/11/11

partner programme and then develop the requisite messaging using ISO
20022 open standards. Provided Bolero could then satisfy Swift criteria,
both technical and functional, they would qualify for a certificate.
G23 Do we need a BPO Recipient Bank if the Obligor Bank is
initiating payables financing or receivables financing to the
obligor?
There is no direct dependency between the issuance of the BPO in favour
of the Recipient Bank and the provision of finance to the obligor.
However, some banks have elected to package their solutions in such a
way that these services can be combined. In other words, the Obligor
Bank issues the BPO on behalf of the obligor in order to provide the seller
with an assurance of payment/access to finance whilst at the same time
offering extended payment terms to the obligor/buyer.
07/11/11
G24 Can SMEs handle BPO operations with no need to ask a
BPO service provider?
A BPO is a bank to bank obligation. To execute a BPO both the Obligor
and the Recipient must be banks. So corporate of all shapes and sizes
would always have to work with a bank of their choice to act as either
Obligor or Recipient.
07/11/11
G25 Is it correct that there is no step for the buyer to
confirm/approve the invoice? Buyers are only notified of
invoice submission by the seller? Therefore, the buyer can
only validate the PO?
The baseline acts as an agreement between banks specifying the data
that has to be presented in order that the BPO becomes enforceable.
Thereafter, if the commercial data set contains zero mismatches there is
no explicit step that additionally requires the buyer to confirm/approve
the invoice data that has been presented since the data fully conforms to
the terms of the original agreement i.e. there are no discrepancies
between the invoice and the PO. However, if the commercial data set
contains mismatches, these would be routinely referred to the buyer for
acceptance/rejection.
07/11/11
G26 Is there information in the payment instructions to match
the appropriate BPO message?
There are two places where payment terms may be specified. The first is
a mandatory field in the payment terms section of the baseline. The
second is an optional field in the BPO section of the baseline. If the
payment terms are missing in the BPO section of the baseline then the
terms used in the mandatory payment terms section of the baseline will
apply.
07/11/11
G27 Is there any confirmation of a BPO, as with a L/C? Because a BPO is a bank to bank obligation then technically it cannot be
confirmed in the same way as a L/C might be confirmed. The obligation
of a BPO Recipient Bank (Sellers Bank) tro pay the seller as ultimate
beneficiary will be covered in the underlying bank/corporate agreement.
07/11/11

G28 Is there such a thing as a transferable BPO, as in L/C? No. The beneficiary of a BPO will always be the Sellers Bank not the
seller so transferability is not an option. The seller can however instruct
the Sellers Bank to pay a third party who may have been acting as an
agent for the actual delivery of goods.
07/11/11
G29 What is the difference between a L/C and a BPO? A L/C requires physical presentation of documents through the banking
system. Under a BPO those physical documents will be sent directly from
seller to buyer, as in an open account transaction. However, selected
elements of data which have been extracted from the documents will be
routed through the banking system for the purposes of automated
matching in order to mitigate risk and to support the value proposition
for a financial service e.g. pre-or post-shipment financing.
07/11/11
G30 Is there an option to provide finance to the buyer? A BPO Obligor Bank could offer extended payment terms to the buyer.
This sometimes forms part of a packaged solution offered by the bank.
07/11/11
G31 Is there an option to support reverse factoring/confirming? Reverse factoring/confirming is most commonly a 3-corner model
proposition requiring one bank only. A BPO will be more relevant in a 4-
corner model based upon an exchange of data between two banks, one
acting on behalf of the buyer and the other acting on behalf of the seller.
Service providers could use the TSU as a matching engine in support of a
reverse factoring/confirming proposition but if only one bank is involved
there is no requirement/role for a BPO.
07/11/11
G32 Does this BPO solution only work well for buyers & sellers
with an established trading history?
Not necessarily. Whatever the relationship between buyer and seller
there will be alternative options available when negotiating payment
terms. Some will favour L/C ; some will favour OA ; some will favour
payment guarantees/standbys ; the BPO represents another option on
the menu. The choice of one method over another is not solely
dependent upon how well buyers and sellers know each other.
07/11/11
G33 How relevant would the BPO be for SMEs taking into
account the complexity of the instrument? Wouldnt it be
much simpler to just open a L/C? BPO seems more suitable
for large corporations with established partners.
See G32 above. The BPO is another option on the menu. Generally, there
will be propositions that revolve primarily around large exporters (e.g.
payment assurance) or large importers (e.g. to support pre-or post-
shipment financing to their suppliers). In either case, there may be a SME
at one end of the supply chain, acting either as a customer of a large
exporter or a supplier to a large importer. In operational terms, the
process should be somewhat simpler and more efficient for a BPO than it
07/11/11

is for a L/C since we are dealing in data and not documents.
G34 How many BPO transactions have been done so far in
2011?
Very few live transactions have been completed so far today. Most
participants remain in test/proof of concept mode. The volume is
expected to grow in light of increased awareness in the market and
driven by corporate demand.
07/11/11
G35 Will the BPO be a good alternative for documentary
collections as well? If yes, what about physical documents?
A documentary collection may be regarded as a more secure alternative
for the seller compared to trading on open account, but less secure than
a L/C. The BPO would be more secure than a documentary collection
since there would be an obligation to pay. This obligation would be based
upon the presentation of data through the banking system rather than
physical documents. The documents would be sent directly to the buyer.
07/11/11
G36 Are you aware of any customer/vendor using SAP ERP that
has implemented this solution?
Corporates using SAP ERP are adopting BPO. Standards have been
developed to support corporate to bank messaging in support of this.
However, we are not aware of any development work having yet been
scheduled by SAP. This is not a barrier to adoption since there are
middleware solutions available in the market today which can easily
translate messages to/from the required standards.
07/11/11
G37 With BPO, are documents sent electronically? Is it still
necessary to mail originals?
Data extracted from the documents is exchanged electronically via the
banks. The physical documents will still sent by mail. These documents
do not need to pass through the banking system.
07/11/11
G38 How will BPO affect factoring/reverse factoring? Is there
an overlap in banking products?
Factoring and reverse factoring are alternative banking solutions that can
be offered without the use of a BPO. It may be possible in some instances
to enhance the value proposition for a factoring service with the addition
of a BPO. For instance, factoring is a post-shipment offering based upon
invoice discounting. A BPO can support financing propositions across the
entire transaction lifecycle. Other differences include: the processing of
factoring transactions is largely manual, BPO is fully automated; with a
BPO you can obtain 100% financing, with factoring solutions it is always
<100%; factoring is a corporate risk taken on a portfolio basis whereas
BPO is a bank risk taken on a transaction basis; factoring can be
with/without recourse, BPO is always without recourse. Reverse
factoring is normally reliant on a 3-corner model involving one bank only,
forcing customers to make use of closed proprietary platforms and
07/11/11

solutions whereas BPO is based upon a 4-corner model making use of an
open collaborative messaging platform.
G39 Does BPO provide for credit lines between banks? The marking of credit lines/limits falls within the operating procedures of
individual banks.
07/11/11
G40 Has any survey been done that describes what corporates
are requesting and demanding from the TSU/BPO. What I
am after is statements and facts of why corporates have
shown interest in the BPO, as this will support our
discussion with clients and stakeholders regarding the BPO.
The only official survey that has been conducted (in 2011 by Aite Group)
was addressed to bank respondents only. It was considered premature
to survey corporates given relatively low levels of awareness. However,
some corporates who took part in Sibos 2011, for example Vale (Brazil)
and BP Chemicals, have made public statements about the potential
business benefits of using BPO. From the exporter perspective the case
focuses on assurance of payment, having access to alternative forms of
finance, reducing costs and improving process efficiency. There are
quantifiable benefits in terms of reduced DSO. From the importer
perspective the case focuses more on securing the supply chain and
improving process efficiency.
07/11/11
G41 Can BPO be used to effect 4 different payments (1) from
buyer to middle man (2) who pays to a broker (3) who pays
to supplier (4) who pays to a manufacturer, using one and
the same BPO instead of 4 BPOs?
It is possible to have multiple BPOs in a single TSU transaction. However,
there can only be one beneficiary (the Sellers Bank) so the BPO might be
used to trigger (1) but subsequent payments between (2) (3) and (4)
would be outside the direct scope of the TSU and the BPO.
08/09/11
G42 80% of trade is from SME who cannot afford to employ a
technical officer to handle EDI messages or BPO messages
or operations. Is there any service company to provide
data input and other operational services for SME for a
fee?
SMEs can often work with software partners who will act as a kind of
service bureau for the purposes of preparing and processing the data.
There are also bank portals available to support e-trade services for LCs,
guarantees, BPOs etc.
08/09/11
G43 Does BPO allow use of software from other companies,
such as China Systems instead of TSU?
Software partners like China Systems have developed applications that
are complementary to TSU. Those partners can process the data on
behalf of the banks/corporate but the data must go through the TSU for
the purposes of matching and report generation. Third party systems will
not perform the data match.
08/09/11
G44 What (stepwise) does the importers bank, already on
SWIFT, need to do to transition from Bills for Collection/
Letters of Credit to Open Account + BPO. Here the
assumption is the exporters bank is already ready to go.
In order to make use of a BPO, both the importers bank and the
exporters bank must be registered to the TSU. From that point on, we
consider three levels of readiness: technical, operational and commercial.
Technical readiness refers to the ability to generate, receive and process
07/11/11

the complete range of structured ISO20022 tsmt messages. Operational
readiness means an ability to satisfy the banks own internal compliance
/ risk management processes. Commercial readiness means an ability to
deliver a business service / solution in accordance with the customers
defined needs. For example, this may involve the ability to support a
proposition for working capital finance.
G45 What does the exporters bank also need to do? This is not
limited to questions such as (a) are there any waiting
timeframes, if registration is involved for any of these
steps? (b) what software changes would be required on
either bank side? (c) are there electronic equivalents for
other trade documents or are user banks left to find
manual means of dealing with those? Here I refer to items
such as pre-shipment inspection reports, etc
In order to make use of a BPO, both the importers bank and the
exporters bank must be registered to the TSU. From that point on, we
consider three levels of readiness: technical, operational and commercial.
Technical readiness refers to the ability to generate, receive and process
the complete range of structured ISO20022 tsmt messages. Operational
readiness means an ability to satisfy the banks own internal compliance
/ risk management processes. Commercial readiness means an ability to
deliver a business service / solution in accordance with the customers
defined needs. For example, this may involve the ability to support a
proposition for working capital finance.
07/11/11

H. Questions related to the Trade Services Utility
H1 Since TSU is a bank2bank model, am I correct to say that
the corporates (buyer/seller) need not be TSU members?
Yes. The TSU is only directly accessible to banks. Corporates should pass
the data to the banks and the banks will exchange the data via the TSU
for matching purposes.
30/06/11
H2 Do you have a TSU Readiness Certification program for the
banks?
The TSU is a subscription based service (see enclosed list of participating
banks). Every bank that is subscribed to the TSU should be technically
ready to send and receive TSU messages, optionally including BPO.
Having said that, it is fair to say that some banks are more advanced than
others in terms of operational and commercial readiness. SWIFT does
have a TSU/BPO Adoption Dashboard for banks which is publicly
available. We dont have a TSU Readiness Certification program today
but would be willing to develop that if/when the need is confirmed.
30/06/11
H3 How long will it take to set up this product / software? Every bank that subscribes to the TSU receives a free piece of standalone 30/06/11

software called the TSU-Interface. This software enables the bank to
connect to the TSU. It is adequate for testing and training purposes and
for processing limited volumes of live traffic. So it is technically possible
for banks to get started quickly, say within 6 weeks. In the longer term,
once the business case has been made, we would expect banks to invest
in back office integration in order to automate the workflow and position
themselves for higher volume demand.
H4 How many TSU users do you have currently? There are approximately 90 banks in 31 countries subscribed to the TSU. 30/06/11
H5 To use BPO, BOTH banks have to have access to TSU? Yes. Both the Buyers Bank and Sellers Bank must subscribe to the TSU
today. If there are additional players such as third party Obligor Banks
involved they must also be subscribed to TSU. Under ICC rules it is
envisaged that the commercial availability of the BPO will eventually
become technology neutral i.e. supported by alternative
platforms/service providers.
30/06/11
H6 Do you have plans to support documents / images / pdfs
attached to a TSU transaction in future releases (similar to
798 solution using FileAct)?
All of the data attached to TSU/BPO transactions is structured between
banks using ISO 20022 standards (TMST messages). The TSU does not
dematerialise documents. It is a vehicle for exchanging data elements
extracted from trade documents. Documents, images, PDFs etc can be
exchanged separately. One optional channel for exchanging such items
would be FileAct (as is the case with the MT 798).
30/06/11
H7 Is TSU available to mid-size corporates? What if my trade
partner is a mid-size not yet on the TSU platform?
The TSU is a bank to bank application. Corporates do not access the TSU
directly, only via the bank. There is no restriction on banks who can join
the TSU or corporate customers who can avail of TSU/BPO-related
services from their subscriber banks. The TSU supports transactions from
any type of end-customers. Whilst the TSU is a bank-to-bank messaging
and matching system using ISO 20022 standards, corporates can
exchange related flows using a variety of channels (including SWIFT, web,
ftp, ) and any format (ISO, ANSI, proprietary, paper, )
30/06/11
H8 Who does the reconciliation task in the TSU offering -
SWIFT or the banks?
The TSU is a matching application that sits on the SWIFT network. Data is
input by the participating banks and matched. The TSU then generates
back reports to the banks either confirming the match or highlighting
mismatches. Where required, the banks have the option of accepting or
rejecting such mismatches.
30/06/11

H9 What is coming up for TSU such as a Release 3 or extending
the messaging service allowing the banks to pick up data
directly from the corporations as today banks have to get
the corporate data and translate it to TSU and back?
There are no immediate plans for a Release 3. However, we will consider
upgrades to the TSU on the basis of customer requirements. Such ideas
are always welcome. Work is currently in progress on the development of
guidelines that will enable corporates to use TSU messaging standards in
support of their corporate to bank communications. It is envisaged that
the messages themselves might eventually be supported in corporate
ERP systems such as SAP & Oracle and exchanged via alternative
channels including bank proprietary systems or corporate access via
SWIFT (SCORE).
30/06/11
H10 What is the difference between BPO and TSU? The BPO may be regarded as a financial instrument (similar to a letter of
credit) which can be established between banks as a means of mitigating
risk, providing payment assurance and potentially to be used as collateral
for financing. To make use of a BPO today banks must subscribe to a
matching application managed by SWIFT. This is the TSU. The BPO forms
part of a TSU baseline. The baseline specifies the data that has to be
matched before the BPO becomes enforceable. The data is then matched
by the TSU matching engine.
07/11/11

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2011 Supply Chain Finance for Corporates webinars Questions and Answers

Version of December 2011 Page 1

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