Bank Payment Obligation Debuts for German and Belgian Companies

Commerzbank’s Mittelstandsbank has processed the first two live transactions supported by a bank payment obligation (BPO), one for a German small to medium-sized enterprise (SME) and one for an international group based in Belgium.

A BPO 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 the participating banks on the SWIFT TSU (Trade Services Utility) platform. This platform was developed by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and made available to banks.

Frank-Oliver Wolf
, Commerzbank’s global head of cash management and international business, said the transactions “mark the cornerstone for establishing a new form of payment security and financing in international commercial transactions”.

Participants in the first-ever BPO live transaction in Commerzbank were Frankfurt-based Polytrade, a global merchant specialising in polymers, additives and polymer chemicals, as well as its business partner in Thailand, Commerzbank Frankfurt and Bangkok Bank.

According to Polytrade, the BPO is ideally suited for the ongoing optimisation of internal payment handling processes. The second live transaction took place almost at the same time: BP Aromatics Limited NV, a Belgium-based group, had agreed with its business partner in Turkey to handle payment for their transaction using a BPO. Processing and clearing lies in the hands of Commerzbank Brussels and Turkey’s ??bank.

BP Aromatics believes that using BPOs offers crucial benefits as the electronic processing allows for greater flexibility if the terms of shipping or trade were to change, for example. It also enables quick establishment of the BPO baseline, which is the basis of the automated matching of electronic data.

The BPO is a new instrument in foreign trade – alongside traditional letters of credit (LOCs) or open accounts – that is fast gaining prominence in the international market. Compared to the open account in particular, BPOs offer an optimal tool for the assurance of payment obligations, which may be financed if the supplier so wishes.


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