Commerzbank And UniCredit Complete First UK BPO Live Transaction

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Commerzbank London and UniCredit announced they have successfully processed the first U.K. Bank Payment Obligation (BPO) live transaction. The transaction covers the export of chemicals from Ireland to Italy. Commerzbank’s customer in the transaction is the supplier, Heraeus Metal Processing, an Irish chemicals company. The buyer, which is UniCredit’s customer, is Ecocat Italia, an automotive parts producer.

“The benefits of the BPO for our clients and their increasing demand for it are the drivers behind our decision to expand our BPO activities in Europe and overseas,” said Petra Burckhardt, global head of product management and trade services at Commerzbank, in a report looking at the transaction.

Raphael Barisaac, global head of trade products at UniCredit, said in the same report: “We have put great effort into improving the availability and convenience of the BPO for our clients. Through the creation of a fully digitalized BPO execution platform, we can offer our clients a solution which combines automated processing of the flows with careful cost management, prompt payments and financial options for the seller.”

According to the report, there is increasing demand for, and a growing number of, BPO transactions as a proven digital settlement tool. The BPO solution consists of the irrevocable undertaking of the buyer’s bank towards the seller’s bank to effect the relevant payment as the invoice falls due. This undertaking of payment is made based on the electronic matching of trade data between participating banks on the SWIFT Trade Services Utility platform. The BPO is a new instrument in trade finance, but it is also an enabling framework for supply chain finance, the companies said. The reasons Heraeus Metal Processing chose to settle the transaction via BPO included payment assurance, establishment of a baseline and cost savings by faster and more efficient processes, among other things.