60-second interview: David Hennah

SWIFT’s David Hennah talks to TFR about the latest news surrounding trade finance, the TSU, the BPO and Sibos 2011.

SWIFT’s David Hennah talks to TFR about the latest news surrounding trade finance, the TSU, the BPO and Sibos 2011.

Q1. SWIFT used to be a boring organisation providing a reliable service to the world's banks – what happened?

If being reliable means boring then, yes, SWIFT is arguably the most boring organisation in the world. We’re very proud of our proven track record of 99.999% system uptime availability. Security and reliability are core components of SWIFT’s identity. We also act as the catalyst to bring the financial community together to work collaboratively on shaping market practice, defining standards and considering new business solutions that will benefit the market as a whole. At the same time, of course, no organisation can rest on its laurels.

SWIFT continues to respond to ever changing market needs with a number of strategic initiatives designed to transform the organisation in order to grow its market share and strengthen relationships with core market segments. There’s much work to be done so I can assure you it’s anything but a boring place to be right now.

Q2. A lot of major companies are looking at multi-bank trade finance – how far developed is this and what will it mean for banks?

Most international trading companies now, regardless of shape or size, have more than one banking relationship. Managing those relationships effectively necessitates the management of information through the efficient use of technology and the deployment of uniform messaging standards. So there is a demand for bank-neutral platforms that enable corporates to access multiple service providers through a single web application and delivery channel. SWIFT’s Trade for Corporates (MT 798) offering directly addresses the need for standardised messaging via a multi-bank channel provider. Banks will no doubt respond to growing corporate demand with the appropriate investment in back-office infrastructures.

Q3. How widely adopted and used has the Trade Services Utility (TSU) become since its launch in 2007?

You’re right to say that the first release of the TSU went live in 2007. However, we all know that the first release was limited in functionality, being very buyer-bank and purchase-order centric. The second release, which went live just over two years ago in 2009, has much richer business functionality, including the Notice of Intent To Pay (NIP) and Bank Payment Obligation (BPO), significantly strengthening the value proposition from a sellers bank perspective. Since bringing Release 2 to market we’ve seen stronger uptake.

It still takes time, of course, for banks and corporates to adapt technically, operationally and commercially. After all, we’re talking about implementing new technology and new operating procedures in support of new products and services supported by a new legal framework. Everything is new and experience shows that the best ideas take time to come to fruition. While the volumes today aren’t huge, we are making steady progress with all the metrics moving in the right direction.

Q4. What are the latest developments in TSU?

These days we are not talking so much about the TSU, but more and more about the BPO. There is no doubt that the availability of the BPO as a means of mitigating risk, providing an assurance of payment and potentially introducing a new option for working capital finance has injected fresh energy and enthusiasm into the TSU project.

So much of the effort today focuses on commercial adoption of the BPO. In parallel with this we have also been working with a small group of banks and corporates to adapt the existing TSU bank messaging standards to support extended communications between the banks and their corporate customers. The availability of such standards may eventually enable corporates to generate, receive and process TSU-formatted messages directly through an ERP system such as SAP or Oracle.

Q5. What are the next stages for the development of the BPO?

I believe it is common knowledge now that SWIFT is working very closely with the International Chamber of Commerce (ICC) Banking Commission to foster the adoption of the BPO as an accepted market practice. There is now an official ICC BPO Working Group whose activities essentially comprise three work streams: legal framework, education and commercialisation.

In the context of the legal framework, the ICC sees it as its role to adapt the existing BPO rules in such a way as to make the BPO technology neutral. This means technically de-coupling the BPO rules from the TSU so that eventually it will be possible for the BPO to be supported by alternative technology platforms and service providers. SWIFT is entirely supportive of this initiative and is playing an active role in assisting the ICC, since the goal is to achieve a uniformity of market practice similar to that achieved by the UCP in relation to the usage of documentary credits.

Q6. What's new – and what can we expect to see from SWIFT at SIBOS?

The trade programme for this year’s Sibos in Toronto builds on what we covered in Amsterdam 2010. Basel III is still a hot topic so we have another panel debate on that. The convergence of cash and trade and related impacts on optimisation of working capital is another subject we’ll be examining. We’ve also got a rather interesting panel looking at the new rules and tools for the next generation of trade and finance, a subject which feeds directly into the evolution of the BPO and ISO 20022 messaging standards.

And, of course, there will be another session on e-invoicing, which continues to go from strength to strength, plus the usual supporting activities in the SWIFT auditorium. All in all, it promises to be another action-packed week.

David Hennah is Senior Product Manager, Supply Chain in the banking industry division at SWIFT. He can be contacted by emailing david.hennah@swift.com

For more information about the forthcoming Sibos in Toronto from 19-23 September, please go to www.sibos.com The views expressed herein are those of the author only and may not reflect the views of SWIFT.