Juanita Maes

1
Trade Services UtilityInnovating in Supply Chain
Management
SWIFT Regional Conference in Central and Eastern
Europe, Istanbul 2006

• Juanita Maes
• Relationship Manager
• Partner Solutions

2
Agenda

• Background
• What is TSU?
• What can TSU do for me?
• Story of a transaction
• Status and planning

3
How do people think of traditional trade finance?

• It's a way to reduce the risk of non-payment
  non-performance, typically for international
  purchases when the buyer and seller don't know
  each other very well.
• It's MT 400s and 700s.
• It's letters of credit (L/Cs) and collections.
• It's a fixed cost business that is under price
  pressure and losing share.

4
Traditional trade finance instruments create
significant value

• Exporter
• Maintains control of ownership of goods
• Bank guarantees payment
• Has predictability of payment timing
• Provides the basis of credit
• Outsources debt collection

• Importer
• Controls risk of non-performance or poor quality
  goods
• Provides credit
• Outsources document checking

5
The market continues to shift
Open account simple payment
Documentary credits
() Corporate risk spectrum (-)
6
Traditional trade growth slower than world trade
100
8000
80
6000
60
USD bn
4000

40
2000
20
0
0
1950s
1970s
1980s
1990s
of global trade in L/Cs
Value of global trade (USD bn)
Source Celent Communications
7
The transformation of trade services open
account payment terms
3
5
11
81
Source Global Business Intelligence Corp report
commissioned by Misys
8
Existing Open Account workflow Minimal
transaction visibility for banks
Buyers Bank
Sellers Bank
6. Payment
Buyer
Vendor
1. Creation of PO and transmission to vendor by
mail/fax/email
2. Shipment of goods
4. Vendor presents paper to be checked by buyer
5. Acceptance of documents by buyer
3. Bill of Lading
Logistics
9
From traditional trade instrumentsto the full
range of supply chain services
Purchase Order
Exporter
Importer
Payment
Financing
Payables (A/P)
Purchase Materials
Dispute Resolution
Manufacture Packaging
Information Management
Receiving Customs
Shipping
Document Presentment
Letter of Credit
Collections (A/R)
Purchase Order
Negotiate Terms
Payment
10
SWIFTs response

• SWIFTs strategic approach
• Expand SWIFTs focus from traditional trade
  instruments to supporting bank services across
  the entire corporate supply chain
• SWIFTs two-part tactical approach
• Maintain the current FIN category 4 and 7 MTs, to
  reflect ICCs UCP, URC requirements.
• Develop the Trade Services Utility (TSU) for
  banks corporate supply chain services

Approved by the SWIFT Board in December 2004
11
SWIFT Trade services market offerings
Guarantees (MT 76x)
Collections (MT 4xx)
Documentary Credits (MT 7xx)
Sellers bank
Buyers bank
MT-based
MX-based
12
Agenda

• Background
• What is TSU?
• What can TSU do for me?
• Story of a transaction
• Status and planning

13
What is the TSU? What does it do?
Matches
Tracks
Reports
14
High level TSU functionality
Bank 1
Bank 2
TSU

• At the highest level, the TSU will

15
Increasing Visibility and Moderating Risk
Seller
Buyer
TSU
Key data
Key data
16
The TSU a packaging of components
42 MX messages in a transaction model covering
purchase order services
Standards
FileAct, InterAct, Browse
SWIFTNet
Industry agreed market practice and RL, with SLAs
Rules
Central matching and rules based engine
Application
Specific Vendor engagement to enable trade
finance applications
Integration
17
42 standardised messages including baseline,
commercial transport data elements
Bank requests reports
Bank submits information
(16) Request activity report (17) Request
transaction report(18) Request status
report (19) Request report time reset
(1) Initial baseline submission(2) Baseline
resubmission(3) Data set submission (4)
Store data set request
TSU notifications
(20/21) Amendment accepted/rejected(22/23)
Mismatch accepted/rejected (24/25) Status change
accepted/rejected (26/27) Status extension
accepted/rejected (28/29) Status change/extension
request(30/31) Action reminder/Time-out (32)
Acknowledgement
Bank requests action
(5) Request status change (6) Request baseline
amendment(7) Request status extension
TSU reports
Bank responds
(33/34/35) Activity/Transaction/Status
report(36) Baseline report (37/38) Baseline/data
set match report (39/40) Delta/Error report (41)
Forward data set submission report (42) Full push
through report
(8/9) Accept/reject amend (10/11) Accept/reject
mismatch (12/13) Accept/reject status
change (14/15) Accept/reject extension
18
Partner landscape different applications
impacted
SWIFTNet TSU

• EAI (Middleware) applications
• format conversion
• validation format / business rules
• business process management
• connectivity

• Trade Finance applications
• back/front-office trade finance
• support standards
• validation formats / business rules
• sometimes connectivity

• E-Banking platforms
• support multitude of formats markets
• products often white labelled by bank
• connectivity channel Internet or LL

• ERP System providers
• Support financial supply chain business
• Supports variety of financial systems
• support multitude of formats
• connectivity via EAI or direct (MA-CUG)

SELLER
BUYER
19
Agenda

• Background
• What is TSU?
• What can TSU do for me?
• Story of a transaction
• Status and planning

20
The transformation of trade services
Integrated supply chain
Buying Process
Receive Goods and Invoice
Select Supplier and Goods
Reconcile and Account
Send Purchase Order
Negotiate Sales Terms
Send Payment
Credit Application
Source Suppliers
Open Account Services
Financial Supply Chain Management Services
Selling Process
Ship Goods and Send Invoice
Reconcile and Account
Receive Purchase Order
Negotiate Sales Terms
Receive Payment
Manage Credit
Quote Price
Source Customers
The financial supply chain parallels the physical
supply chain and represents transaction and
financing services related to cash flow, from the
buyers initial order through reconciliation and
payment to the seller.
21
Financial Services via the Supply Chain

• Opportunity to leverage Key Trigger Points

Commercial Agreement
PO Issuance
Shipment
Acceptance
Payment
22
Agenda

• Background
• What is TSU?
• What can TSU do for me?
• Story of a transaction
• Status and planning

23
Story of a transaction

• Buyer Harrods
• Seller Sony
• Buyers bank the Royal Bank of Scotland
  (RBOSGB2L)
• Sellers bank the Bank of Tokyo Mitsubishi
  (BOTKJPJT)
• Goods
• 200 Digital Cameras, unit price 650 GBP
• 150 Television flat screen 42, unit price 1500
  GBP
• 175 Home Theatres, unit price 800 GBP

24
(No Transcript)
25
Establishment of the transaction Initial
Baseline Submission
26
(No Transcript)
27
Establishment of the transaction Baseline
Re-Submission
Intl. Baseline Submission
28
(No Transcript)
29
Establishment of the transactionBaseline Match
Report
Intl. Baseline Submission
Full Push Through Report
Acknowledgement
Baseline Re-Submission
30
TSU message flows Transaction Amendment
31
TSU message flows Amendment accepted
32
The TSU Status and plan
33
Agenda

• Background
• What is TSU?
• What can TSU do for me?
• Story of a transaction
• Status and planning

34
The Pilot Banks
35
The TSU Status and plan
36
Questions and Answers