The ICC Banking Commission, one of the developers of the bank payment obligation (BPO), believe that banks from the OECD face issues relating to internal approvals and compliance which have made BPO harder to implement. In addition, the larger banks tend to want to serve both sides of the trade - imports and exports - making the adoption of BPO, which is a multi-bank payment process platform for trade finance, much less important. While the mid-tier and smaller banks understand the value of BPO, even when it may be only at one leg of the trade. This also explains why banks in Asia have led the adoption of BPO globally with 13 banks from the region having gone live.
Other feedback on BPO’s progress from this week’s SIBOS showed that:
- banks will need to change their mindset from one that is "what's in it for us" to aligning their interest with their customers
- some banks feel that other banks need to let go of the old thinking and focus on the larger opportunities
- to succeed with BPO banks need to be experts on the BPO payment process so that they can distinguish themselves from their competitors
- the BPO expert banks believe that with the drop in commodity prices and the rise of China's domestic market, access to cash flow will become increasingly critical and so BPO could flourish
- the higher level of operational efficiency that can be achieved using the BPO needs to stressed, e.g. adopting electronic transfer through BPO is a much faster proposition than the traditional L/C, as the transaction can be completed within three days
- banks should be looking at innovating around BPO solutions such as in pre or post-shipment finance.
CTMfile take: This feedback shows that, although there are signficiant benefits and opportunities from using the BPO, the concept is struggling to convince enough senior bankers and corporates.
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