How are banks and corporates
working together to ensure supply
chain efficiency
Tuesday 26 October 2010
Challenges
The current state
Forwarder
Warehouse
EDI
Airlines
Shipping
FAX
Highly
paper
Seller
driven
EDI
Seller’s
bank
Transport
EMAIL
Goods
Lack
of
Payment
standards
FAX
EMAIL
Inspection
Quarantine
Government
COURIER
Physical
document
delivery
Buyer
COURIER
Buyer’s
bank
Financial Supply Chain
Cross-Border Open Account Matching with SWIFT TSU
Trade Services Utility (TSU)
Seller
Buyer
Database
Rulebook
Central data
matching
Buyer’s
bank
Seller’s
bank
Other
bank
3
Other
bank
TSU is a SWIFT service using SWIFTNet messaging and XML standards to access a central data
matching and workflow engine to support banks’ supply chain services and is governed by a rulebook.
BPO as Industry-wide Inter-bank Risk
Mitigation Instrument
Physical presentation of
compliant documents
Electronic presentation of
compliant data
BPO Case Study
Presentation title – dd month yyyy – Confidentiality: xxx
5
Contents
TSU Program of Bank of China
BPO Application in domestic trade in China
Our thought for the Future
1.1 TSU Program of Bank of China
Mile Stone
• Oct, 2006, joined Trade Services Advisory Group
• Jun, 2007, registered to be membership of TSU
• Aug, 2007, Shanghai Branch system completed
• Oct, 2007, Shanghai Branch finished China’s first TSU business
• Jun, 2008, Shenzhen Branch system completed
• Aug, 2008, Shenzhen Branch finished its first TSU business
• Feb, 2009, started TSU RELEASE 2 testing
• Apr, 2009, signed the first TSU Bank-to-Bank Agreement globally
• Jul, 2009, Qingdao and Jinan Branches system completed
• Sep, 2009, BOCHK joined TSU
• Mar, 2010, made the first Bank-Corporate TSU service agreement
containing BPO globally
• Apr, 2010, Shanghai Branch finished the first TSU BPO business globally
• Jul, 2010, Shenzhen Branch and Shanghai Branch finished the first TSU
BPO post-shipment financing business globally
• By the end of 2010, 14 branches in 6 provinces of mainland and Hong Kong
will have the system to conduct TSU business
1.2 TSU Program of Bank of China
BEIJING
JINAN
NANJING
QINGDAO
WUXI
NANTONG
CHANGZHOU
HANGZHOU
SHAOXING
GUANGZHOU
HUIZHOU
FOSHAN
HONG KONG
2.1 TSU BPO
Bank credit
BPO
Common electronic platform
Combined with trade conditions and information;
facilitating financing instrument innovation
2.2 The Current Situation of Domestic L/C
Business in China
• A survey conducted by SWIFT among five Chinese banks in 2009
indicated that 90% of domestic L/C businesses were intra-bank
transactions while only 10% were completed in a inter-bank way.
2.3 Obstacles to the Development of
Domestic L/C Business in China
1
At present, there is not a unified
telecommunications platform to support inter-bank
domestic letter of credit business in China.
2
Most of domestic LC were issued in paper and
inconvenient in verifying authentication.
2.4 TSU BPO Provides a Solution
System
Support Chinese Character input

Unified platform


Advanced telecommunications
method
Convenience for
operation

Potential to be widely
utilized in China

Opportunity for banks to
provide value-added trade
services, including TSU
BPO pre-shipment/postshipment finance,etc.

Information exchange
safety and accuracy
TSU 2.0.30

Enhancing transaction‘s
creditworthiness

Backbone for banks to offer
altenative forms of financing
BPO
Opportunity for Supply Chain Finance
2.5 TSU Application in the Chinese Banking
Industry
11 member banks in mainland China
China has most TSU member banks in the world
In July, 2009, TSU China Market Users Group
established.
2.6.1 TSU BPO Case of Shanghai Branch of
BOC
Buyer
Seller
1.Contract
SWIFTNet
Buyer’s Bank
5. BPO
Seller’s Bank
2.6.2 TSU BPO Case of Shanghai Branch
of BOC
Buyer
Seller
5.Payment
5.Payment
1.Shippment
2.Documents
Submission
SWIFTNet
Seller’s Bank
Buyer’s Bank
5.Payment
2.7 Prospects of TSU BPO Application
Domestic trade
• Pilot branches of Bank of China will conduct TSU BPO business
continuously in the near future.
• To establish communication and cooperative mechanism to
promote TSU BPO business within the Chinese banking
industry.
2.8 Prospects of TSU BPO Application
International trade
• Pilot Currently, mostly as exporters’ bank
– As the world factory, China is a big export country.
– Many SME exporters eager for trade finance supports.
• In the near future, more attempts as importers’ bank
– With Chinese government’s stimulating policy, the percentage
of import volume in the international trade increased.
– More and more Chinese enterprises establish its own supply
chain.
3.1 Thought for the Future
Commercialisation
of TSU BPO
Validity of BPO
Some Lurking
problems
1. Analyzing customer
TSU Rulebook
1. RWA ratio calculation
base’s trade settlement
approved by ICC as a
2. Accounting measures
transaction records to
universal regulation
look for target clients.
and practice.
2. Collective wisdom,
further collaboration
and joint efforts are
needed from banking
industry to promote the
service.
BTMU TSU Update
Presentation title – dd month yyyy – Confidentiality: xxx
19
Live Case : Within BTMU
Trade Services
Utility
Buyer’s Bank
BTMU/Tokyo
Buyer
Shipper’s Bank
BTMU/Hong Kong
Supplier
HK Supplier
ITO YOKADO
Following Steps
 BTMU has finished step 1
 We are now on the phase of
step 2
STEP 1
TSU Payment Service
(without BPO)
Interoffice
Completed
STEP 2
TSU Payment Service
(without BPO)
Inter
bank
Preparing
STEP 3
TSU Payment Service
(with BPO)
Interoffice &
bank
Preparing
(within
bank)
Coverage of present TSU product
TSU Payment Service (without BPO) effect for corporate operational risk
• List of the risks and solutions related to global trade business for corporate
Type of risk
Credit risk
Subsidiary
manage
risk
Currency
risk
Operationa
l risk
Tasks
Bank Solutions
•
New business with new customer
•
Credit research arrangement
•
Differed payment by open account base
•
Invoice Discount (non-recourse)
•
Business expansion with developing countries
•
Factoring
•
L/C confirm, Forfaiting
•
Monitoring of subsidiary finance and accouting
•
Global CMS
•
Efficient payment and claim between subsidiary
•
Invoice Discount (short term & long term)
•
Fund procurement of subsidiary
•
Arrangement of audit service
•
Internal audit of subsidiary
•
Risk hedge of currency fluctuation
•
Forward foreign exchange contract
•
Currency management system preparation
•
Invoice Discount (short term & long term)
•
Currency management rule review
•
Advice for currency management
•
Grasp of total currency risk
•
Currency management portal
•
In-house maintenance of the trade know-how
•
Outsource product for trade operation
•
Reliability and speediness of the settlement
•
New settlement method
•
Efficiency of trade operation
•
Settlement based on Purchase order
•
Management of payment receivable
•
Traceability and visibility
TSU
Function
Comparing the Flows
Flow chart of L/C
Importer
Import Bank
Flow chart of TSU
Export Bank
Exporter
Purchase
Order
Trade Contract
Trade Contract
IMPORTER
Exporter's Bank
EXPORTER
Purchase
Order
Trade Contract
Trade Contract
SWIFT
Prepare LC
Application
TSU
Application
LC Apply
Importer's Bank
Send
MT70X
LC
Appl
Receive
MT70X
LC
ADV.
Document checking
Document delivery
Imp Arrival
Advice
Doc
Checking
Imp Doc
Arrival
Receive
Import
Doc
Dispatch
Export
Doc
P/O
Copy
LC ADVICE
Matching
Result
Ship
Arrangement
ＴＳＵ
TSU
Application
Notice
B/C
Appl
BL&INV
Data
Input
MATCHING
Matching Result
(Contract Info)
Matching Result
(Contract Info)
P/O
Copy
Notice
Contract Data
Present
Ship Doc
B/C
Application
Data
Input
TSU
Applicatio
n
Matching
Result
TSU data input
TSU data
submit
Matched
Prepare
Ship Doc
Doc
Checking
Data
Input
TSU
Application
Ship Doc
Copy
Shipment
Shipping
Document
Present Copy
Order for
settlement
Imp
Doc
Receive
Settlement
Operation
Imp
Doc
Document Release
Delivery
Send
MT40X
& 20X
ReceiveM
T40X
& 20X
Credit for
Receive
Bills for
Payment
Credit Collection
Matching
Result
Arrival
Notice
MATCHING
Matching Result
(Shipping Info)
Matching Result
(Shipping Info)
Automatic Payment
(Import Settlement without L/C)
Settlement
Operation
Operation for
Receiving the
Payment
Notice
Matching
Result
Receive
Payment
Settlement Term Shortened by TSU
<D/P>
No. of Date
Day of Week
1
Monday
2
Tuesday
Application
Expo r t e r
3
Wednesday
4
Thursday
5
Friday
6
S
7
S
8
Monday
9
Tuesday
10
Wednesday
11
Thursday
Delivery &
Presentation
to Bank
Draft
B/L
Invoice
P/L
(Financial Dept.)
Application
Courier
Draft
EXP Ban k
US$
Dispatch
US$
B/L
Invoice
DOCs
P/L
A/N
Cover
Letter
IM P Ban k
B/L
Invoice
Draft
B/L
Invoice
P/L
P/L
DOCs
Check
A/N
US$
US$
B/L
Invoice
Im po r t e r
P/L
<TSU>
No. of Date
Day of Week
Expo r t e r
1
Monday
2
Tuesday
3
Wednesday
B/L
Invoice
Copy
Copy
US$
TSU data
Input
US$
EXP Ban k
B/L　Data
Invoice
Data
TSU Data
IM P Ban k
B/L　Data
Invoice
Data
Im po r t e r
US$
B/L　Data
Invoice
Data
US$
4
Thursday
5
Friday
6
S
7
S
8
Monday
9
Tuesday
10
Wednesday
11
Thursday
Operation within Bank
IMPORTER
IMPORT BANK
TSU
Application
TSU
Application
Data
Input
Data
forInput
TSU
Notice
DataData
Input
for TSU
Input
MATCHING
TSU
Application
P/O
Copy
Matching Result
(Contract Info)
Matching Result
(Contract Info)
EXPORTER
TSU
Application
2
1
P/O
Copy
Matching
Result
EXPORT BANK
ＴＳＵ
Notice
Matching
Result
Sh ipm e n t
3
Matched
Contract Data
5
Matching
Result
Operation for
Export Bills
for Collection
B/C
Application
4
Operation for
receipt of import
B/C Arrival
DataData
Input
for TSU
Input(With
B/C ref.No.)
Ship Doc
Copies
MATCHING
Arrival Notice
Matching Result
(Shipping Info)
Matching
Result
Matching Result
(Shipping Info)
Automatic Payment
(Import Settlement without L/C)
6
Shipping
Document
Operation for
Settlement of
Import B/C
Receive
Payment
MT202
7
8
Operation for
Settlment of
Export B/C
Operation for
deposit for
customer acc
Assumed Operation for BPO within Bank (based on LC flow)
IMPORTER
IMPORT BANK
TSU
Application
TSU
Application
EXPORT BANK
ＴＳＵ
P/O
Copy
TSU
Application
2
1
Data
Input
Data
forInput
TSU
DataData
Input
for TSU
Input
MATCHING
EXPORTER
TSU
Application
P/O
Copy
Bank Payment obligation
Matching Result
(Contract Info)
Matching
Result
3
4
BPO issuance
operation
Matching
Result
Matching Result
(Contract Info)
BPO advice
operation
BPO Advice
Sh ipm e n t
Matched
Contract Data
7
Matching
Result
5
6
Operation for
receipt of import
B/C Arrival
Matching Result
(Shipping Info)
Settlement for Import B/C (with BPO)
(within 5 days)
Operation for
Settlement of
Import B/C
Data Input
Data for
TSU (With
Input B/C
or B/B ref.No.)
B/C
Application
Ship Doc
Copies
Shipping
Document
MATCHING
Arrival Notice
8
Operation for
B/C or B/B
(withBPO)
9
BPO balance
deduct
Operation
Matching
Result
Matching Result
(Shipping Info)
Receive
Payment
MT400
MT202
10
Operation for
settlment of
B/C or B/B
11
Operation for
deposit for
customer acc
Trade2Cash Faciliting Cross Border Trade Finance
Presentation title – dd month yyyy – Confidentiality: xxx
27
About Trade-Van: Full Cooperation Between
Government and Private Sectors
Mission Statement:
• Simplify and automate customs
clearance procedures
• Facilitate international trade
• Streamline global logistics
process
B2G Business:
•Declaration
•Manifest
•Duty payment
•Bonded Management
•Free Trade Zone
•Permit Licensing
B2B Business:
•eProcurement
•eSupply Chain
•Global Logistics
•Intelligent Retail eHub
Supply Chain
Financing
Capital and Shareholders:
Paid up capital- NT$1.5 Billion
Government owns 36%-M.O.F.
Private sectors owns 64%
>45,000 companies
>70,000 users
2010
Tri-party Collaboration
1
MOU
• MOU signed: SWIFT, Trade-Van and Hua Nan Bank
One-stop documents/financial services with TSU/BPO
2
Joint Marketing
• Visited prospects to explain the joint services
3
Pilot Customer
• Recruited first pilot user
Trade-Van
Trade Financing
e-Trade Management
e-Customer Relationship Management
Current Problem in Trade Finance
Challenge of SME Traders:
• Low level of data
disclosure, difficult to
get bank financing
• lack of OA finance
products, credit rating
and risk assessment
tools to provide trade
finance to traders
• Abundance of
documents involved in
int’l trade require
multiple entries of
same data
• Lack of IT investment
to streamline the int’l
trade process
Challenge of Banks:
• Lack of visibility in
the trading
information, difficult
for banks to provide
trade finance to
SMEs, hence lost of
opportunities
• Higher risk to provide
financing to SMEs
• Difficult to
authenticate firsthand trading
information for banks
to verify the
transaction, hence
difficult to promote
trade finance service
Trade2Cash: Single Window for Trade Finance
Trader A
Bank A
3rd Party
Logistics
Trade2Cash
Bank B
Powered By
SWIFT & PAA
Trader B
Customs
Brokers
Bank C
Trader C
Shipping Lines/
Freight Forwarders
Insurance Co.
Bureau of Foreign
Trade
Customs Network
For Traders
For Banks
Single service window to apply
trade finance to multiple banks
Single access point to monitor the
trade activities and dynamic risk
status
TC Trading – a Traditional Trading Firm
Doing Business with LC
• Established in 1971
• Main import/export products: sweaters, knitted and woven garments, poly bags,
auxiliary chemicals
• Import/Export area: Asia, Europe, North America
Current Status on International Trade:
• Most export based on LC, some on OA – heavy loading on preparing LC
documents, negotiation and discrepancies costs
• Most import based on LC, some on OA – requires import finance
Pilot Case: Import Scenario Based on BPO
1. Purchase Order
PO
TC Trading
BPO
Exporter
Data Mapping
BL
IN
V
Compliance
Check
C
O
Insuran
ce
Trade2Cash
Trigger Import
Financing
3.Data
exchange
Powered By
SWIFT & PAA
Unload from Vessel
Customs Release
Overseas
Duty Paid
Taiwan
2.Data
Transmission
5.Data
Transmission
6.Matching
Report
6.Matching
Report
Hua Nan Bank
TSU
Export Bank
BPO: Bank Payment Obligation
Pilot Case: Export Scenario Based on TSU
1. Purchase Order
Overseas
Buyer
Data Mapping
TC Trading
I
N
V
Compliance
Check
3rd Party Logistics
1.1 Purchase
Order
ERP
Shipping Lines/
Insurance Co.
Forwarder
Trade2Cash
BOFT
Powered By
SWIFT & PAA
BL
CO
Insurance
Customs Release
Taiwan
Overseas
5.Data Transmission
5.Data Transmission
Trigger Export
Financing
6.Matching Report
6.Matching Report
Import Bank
Loading on Vessel
TSU
Hua Nan Bank
Value Proposition for Traders
Exporter
• Single service point for trade and
financing
• Automatic compliance check
• Avoid data mistake from duplicate
data entry
• Improve operation efficiency,
reduce trading document
preparation time
• Improve existing open account
payment method, increase
financing opportunities
• Integration with corporate legacy
system, improve data quality and
consistency
Importer
• Increase supply chain efficiency,
helping suppliers to obtain bank
financing
• Increase import financing
opportunity (delay payment of
BPO)
• Automatic compliance check,
guarantee data consistency
• Integration with trading and
logistic system, increase data
quality
• Real time monitoring of cargo
visibility
Value Proposition for Hua Nan Bank
Increase Supply Chain Efficiency
Integration
Customs
With Logistics
Clearance
Service
Information
Providers
Trading Infor.
Compliance
And Mapping
Reduce Operation Cost
Increase Cargo Visibility
Business
Intelligence
Analysis
Increase Trade Finance Business
Integration
With Trading
System
Streamline Trade Finance Procedures
Joint Marketing
Export/Import
Performance Report
Customers
Identification
Trade Finance Process
Credit
Checking
Account Setup
Credit Line
Establishment
Real Time Transaction Data
Trade
Finance
Panel Discussion
Presentation title – dd month yyyy – Confidentiality: xxx
37
Panel Discussion
Xiong Yuan Meng, Bank of China
Daisuke Kamai, Bank of Tokyo Mitsubishi UFJ
Alicia Say, Trade-Van
Connie Leung, SWIFT
Questions & answers
?
Thank you