SWIFT, a financial messaging provider for institutions in 210 countries, and the banking commission of the International Chamber of Commerce (ICC) collaborated on the Bank Payment Obligation (BPO), a new payment tool that can be used between banks and looks poised to enhance, or possibly replace, commercial and confirmed letters of credit.
The BPO essentially moves all of the manual tasks associated with using a commercial letter of credit and automates them, creating fewer chances for errors throughout the process. It represents an irrevocable undertaking given by one bank to another bank that payment will be made on a specified date after a specific event has taken place, according to SWIFT-ICC. “This ‘specified event’ is evidenced by a ‘match’ report that has been generated by SWIFT’s Trade Services Utility (TSU), or any equivalent transaction matching application,” they added.
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