BPO scores a ‘first’

Standard Chartered Bank has facilitated the first end-to-end automated trade finance transaction with the Bank Payment Obligation (BPO) through its Straight2Bank platform. It was carried out between BP’s petrochemicals business for Oman-Based OCTAL and a global leader in the packaging industry.

This transaction heralds a new era of greater efficiency and paperless trade settlement. Launched by SWIFT, the BPO is an effective payment undertaking between banks that payment will be made on a specified date after a successful electronic matching of data according to industry-defined ISO 20022 message flows.

Gary Slawther, corporate treasurer, OCTAL, said, “This is a very exciting development for OCTAL as it is in complete alignment with our business objectives of maximising efficiency in all areas of our operations and creating true partnerships with our suppliers and customers for the benefit of all involved in the supply chain, right from raw material producers to end-user consumers.  As a knowledge-based and technology driven organisation, leveraging the benefits of BPO is both a core aim and competence of OCTAL.”

BPO can be particularly useful in the commodities industry (such as oil, gas or petrochemicals) where the dependence on documents is not intrinsic to conducting trade.

David Vermylen, global credit manager, petrochemicals, BP said, “The BPO programme offers us a number of efficiency benefits through reduced document handling and lower confirming costs, and by conducting business with less paper compared to traditional letters of credit.”

Using BPO, Standard Chartered Bank clients can benefit from assurance of payment and risk mitigation but through a much faster, paperless and fully-automated process – thereby, bridging letters of credit and open account transaction. The result is a less complex and more cost-effective trade settlement tool that accelerates the payment cycle.

Farooq Siddiqi, regional head of transaction banking, MENA, Standard Chartered Bank said, “We have been at the forefront of trade finance innovation and we are glad to execute a first-of-a-kind transaction for our client in the Middle East. This transaction is a clear indicator of our commitment to continue deepening our client relationships in the region and introducing best international practice in the industry.”