Why the BPO/TSU should be a big “YES THANK YOU”
Many years back I attended my first meeting with Bolero. Since then Bolero has changed face, clothes even wardrobe many times.
Today there is an impression in the market that Bolero is yesterday’s news. Many things have been said about Bolero. Here I will say only this: Bolero has been one of the biggest game changer within Trade Finance the latest 20 years. They have changed the perception of how Trade Finance works. They made the path for electronic documents to be presented under LCs.
I fully acknowledge that the bulk of documents presented under LCs are far from electronic. I acknowledge also that the majority of documents that are in fact electronic are not routed through Bolero. Still, comparing the LC world October 2002 with October 2012 the “eDegree” has increased significantly. Surely not the way that Bolero would have hoped … but still: A huge number of banks offer all kind of electronic solutions to enhance the trade finance process – for the benefit of their customers. Some offer tools where the beneficiary can prepare their documents based on the actual LC text. Some offer various kinds of ePresentation tools; e.g. where the documents can be printed at the bank … or even forwarded directly from the beneficiary to the issuing bank – on behalf of the nominated bank.
These are just examples … but my argument is that Bolero has been material in changing the mind-set of the industry so that these options are now available …
BUT what does that have to do with the TSU/BPO? In many ways the TSU/BPO has similarities with Bolero. There seems to be both a huge ”hype” around it right now … as well as some really really critical voices claiming that this will never happen. Will it happen? Frankly, I do not know. I think it depends on whether or not the industry wants it to happen. I have elaborated on this view in my article “Trade Services Utility and Bank Payment Obligation” available here: http://www.kimsindberg.com/chinaforex02.html
However; the fact is that – as was the case with Bolero – you can argue from now to the end of the world that this will never happen – and you may be wrong … but you may also be right!
Still I sincerely believe that the TSU/BPO is an offer that the banks must embrace with a loud and clear “YES THANK YOU!”
Now – why is that? Is it not risky? Is it worth the time and money? Will the business case hold? Huuu I hear many questions …
Let me try to explain: The trade finance industry is simply “stuck.” The level of MT700 is not increasing. The customers do NOT choose to work with LCs because they like it … but rather because they have to – many downright hate it. Although the eDegree has increased – the whole LC process is still so awfully manual and troublesome. This manual examination of documents is … just so … 1890! And these endless fights about discrepancies – the nitty gritty stuff … oh my god! It is scaring the customers away … and the banks seem to keep doing it … I have asked them to stop – but they do not seem to listen :-)
Two core principles of the LC are that they are 1) based on documents … and 2) those documents must be examined – manually.
So although Bolero changed the perception of how Trade Finance works … they did not change that! Although electronic … the documents – from a Bolero point of view – are still documents that must be examined … (Bolero SURF … is that still out there??? I Google’d it and found only this page http://www.mantissa.co.uk/support/bolerosurf.htm from October 2001 linking to a Bolero site that is no longer there …hmm).
Anyway; this is where I personally love the TSU/BPO: They do not deal with documents – rather they deal with data. SWIFT have shown the world that there are other ways to secure trade … going in a new direction. They deal with data; and data is much more “2012” than documents … Data can be “matched” electronically – so that no-one need do any manual “examination.” Data is the future. Getting rid of the documents is the future. Matching is the future!
So again: I do not know if the TSU/BPO will be the new tomorrow … but I do know that it will be a game changer … and that it will (I think it already has) changed the perception of how Trade Finance works … and that is exactly what the LC community needs…badly! Someone to make the path to the future … for the rest of us to follow: YES THANK YOU!
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