Can Bank Payment Obligation and Blockchain co-exist？
Alan K.L. Wong
Trade Finance Transformation Leader. Global Exposure with Top Global Banks. Speaker. Blogger.
Yes it can. Bank Payment Obligation or BPO was created by SWIFT back in July 2013. In conjunction ICC published URBPO 750 laying down the rules on how BPO would operate. Whilst everybody is looking at trade digitisation via blockchain, you need to incorporate BPO on the drawing board when you design a trade blockchain infrastructure.
Why？ Some banks would require a BPO from their counter-party bank essentially buyer’s bank in order to provide financing to their supplier since there is the absence of a bank-supported financing instrument such as an LC under an open account transaction. BPO can be created electronically and it is unconditionally honoured upon satisfactory matching of data sets on a TMA Trade Matching Application such as SWIFT’s Trade Services Utility which is ISO 20022 compliant. Several BPOs can be created for large dollar value ticket item hence it achieves the objective of risk distribution in the event the deal in question is too big for a single bank to swallow in terms of risk appetite.
To sum up, BPO is a risk mitigation tool and financing instrument and it can co-exist happily with a trade blockchain infrastructure.
For further discussion on this topic, please contact us.
Vice President- Digital Products SDG @ IndusindBank | Fintech Expertise| Ex - Mashreq Bank, Airtel Payments Bank, PNB Housing| IIM K
7 年Quite interesting
Managing Director at Yemen Loan Guarantee - YLG
7 年I do agree with you Mr. Wong! Co-existence of BPO and BlockChain technology will be supportive to both of them especially for BPO. I believe that all tools of digitizing Trade Finance need to be integrated in order to assist trade parties adopting paper-less trade transactions easily in their future business.