SWIFT’s MT798 messaging standard trade finance still only has few multi-national corporation users
by Kylene Casanova
The objective of the MT798, launched in 2008, was to give a total view of trade-related exposure.
The MT798 messaging standard for L/Cs, standby L/Cs, and demand guarantees laid the groundwork for a standardized link between a corporate and the entirety of its financial institutions. When the bank receives an envelope message MT798, it executes the various sub-message instructions that are wrapped in the file. Ideally, the communication from corporate to bank and vice versa is linked directly to the corporate's internal enterprise resource planning (ERP) so that all departments within and subsidiaries of the group are able to use a single application instead of entering various trade portals individually. This increased visibility allows corporate treasury to more efficiently utilize credit lines and unlock working capital.
In the last five years post, only 12 companies have implemented the MT798 standard - worldwide, including Hong Kong-based wholesale and retail company Metro Group Buying (MGB) as well as Indian conglomerate Reliance Industries that is currently undergoing implementation. 28 banks have adopted the MT798 standard globally, 12 of which count among the top 20 trade banks.
To take advantage of the new messaging standard the corporate ERP system(s) need to be upgraded to facilitate the centralized management of these trade transactions. Not only, the corporate treasury department needs to be using the standard but also the procurement department, for instance, as it orders goods and ultimately triggers the request for an import L/C. Technology vendors such as Surecomp, Misys or China Systems provide the front-end applications that integrate the internal ERP with the banking providers. The ERP vendors such as SAP and Oracle also need to offer the applications necessary to integrate the trade workflow with the businesses' ledger, although there are stand alone, specialist systems available to manage and process the MT798 messages.
Those multi-national corporations that have implemented the MT798 have found that it has streamlined management of their LC database across multiple banking providers and completed the movement of all paper transactions to a single electronic platform, and the payment application is fully integrated with their ERP system.
For those corporates already connected to SWIFT, most of the cost is for acquiring a specialized trade application, or upgrading the ERP which some corporates have done themselves.
Introducing new message standards is always a lengthy, tortuous business. Given the current gloomy global economic climate, multi-national corporations are unlikely to be investing in automation of LCs. Maybe the BPO messages stand more chance?
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