Automated BPOs favoured by treasury departments

Automated BPOs favoured by treasury departments

After last week’s speculation surrounding Greece’s exit from the EU, regulations like the bank payment obligation (BPO) are becoming popular instruments, as treasurers are seeking a more modern approach to handling working capital and minimising risk.

The BPO operates by sending the seller an automated letter of credit which guarantees payment as long as delivery conditions are met. If the buyer is unable to make the payment, the bank is obliged to cover the outstanding amount.

In collaboration with the International Chamber of Commerce Banking Commission, Swift have produced these set of rules for corporate banking and they describe the BPO as a new solution in supply chain finance which will shape trade in the 21st century.

Chair of the ICC Banking Commission and global head of trade and working capital at Barclays, Kah Chye Tan, says that it is important for companies to provide risk management services as the world’s economy is embracing technology more so than before.

Trade finance is a critical banking service supporting the world economy. It is vital that the industry aligns on enhanced rules and tools in support of trading counterparties whether large or small. The ICC Banking Commission views the development of the BPO rules and the related ISO 20022 messaging standards as strong foundations for banks to provide modern risk and financing services aligned with today’s technology evolution,” Tan says.

However, the increased use of advanced technology in treasury departments has led to a fall in manual cash management and furthermore, the median number of full time employees in finance departments has declined by 40% and corporate jobs have been taken by robots, according to consulting firm Hackett group.

Mihir Shukla, CEO of provider of robotic process automation technology, Automation Anywhere Inc, believes that although automation does reduce the number of available jobs, software can help businesses operate more effectively.

Shukla explains that for finance, a robotic process automation trend is the way forward and the use of BPOs to ensure payments are secured is necessary. “BPOs and the shared service industry at large employ a workforce that is relatively low skilled. So it seems inevitable that the RPA trend is coming to that industry,” Shukla says.

The first live transaction of a BPO connected with the issuance of an electronic bill of lading was announced by SWIFT in April 2015 and has set a milestone for the increased market adoption of the BPO,” according to Angela Koll, vice president of Commerzbank. Koll continues to say that “the fact that non-bank vendors in the market are seeking to create a proposition in the BPO space is positive progress for all.”