It is well understood that a significant amount of working capital is locked up in the financial supply chain. The move to global sourcing in pursuit of lower supply costs has generally increased the working capital required, introduced additional bottlenecks and potential inefficiencies in the global supply chain, increasing the headaches for both the CFO and for the Treasury, Trade Finance and Traffic executives.
Among the key contributors to inefficiency are the still largely paper-based processes required to support the traditional trade finance instruments; notably the Letter of Credit, Standby Letters of Credit, Guarantees and Collections.
Although a number of banks have invested in technology to automate some of these processes, this automation has been designed to lower the cost of processing the transaction by the bank rather than to meet the requirements of their corporate customers. Indeed in many cases the use of such bank systems simply pushes more issues to the corporate in terms of additional data entry, and the need for the corporate to support multiple channels, platforms, formats and processes.
Commodity Traders, in particular, rely of the availability of credit lines from their partner banks and the efficiency in managing working capital and cash. Commodity Traders are generally still major users of traditional trade finance instruments like Letters of Credit and Guarantees as well as Documentary Collections.
It is not surprising therefore that adoption of multi-bank trade finance is particularly evident in the Commodity Trader community. Large global Commodity Traders are increasingly adopting open multi-bank solutions on a global basis for the efficient management of traditional trade finance and the tight integration into the treasury and contract functions. At the same time an increasing number of medium and small specialist commodity traders are also adopting the same multi-bank trade finance solutions for efficient, predictable and fast collaboration with their community of banks.
Commodity Traders in Energy, Metals, Chemicals and Agri are all now driving multi-bank trade finance initiatives with their banks.
And because the community of banks who provide structured trade finance to the Commodity Trader community is quite closed, this is driving adoption and additional benefit for these banks also, with Bolero fast becoming the standard for multi-bank automation of the trade finance processes.
Whether using Bolero’s powerful web applications (Bolero 4Business) which deliver easy-to-use multi-bank applications for Letters of Credit, Stand-by Letters of Credit, Guarantees and Collections, or whether used to enable third party or in-house developed trade finance management solutions, Bolero provides a unique secure multi-banking service which brings together commodity traders and their banks on a neutral highly secure collaborative channel.
Unlike other initiatives, this is not a solution designed purely for the benefit of one party. Bolero provides a comprehensive messaging infrastructure (Bolero Open4Trade) in support of the end-to-end trade finance processes involving both corporate and bank. In addition, the hosted neutral, trusted third party nature of the Bolero service ensures that both commodity trader and bank are fully insulated from the specific solutions or technology choices of the other party.
The unique characteristics of the Bolero service allow truly electronic collaboration between a commodity trader and its banks based on trade finance messages which are fully checked by Bolero for accuracy, consistency, and validity as well as ensuring the identity of both sender and recipient.
While providing comprehensive multi banks trade finance functionality for the commodity trader, Bolero also ensures that this meets the exacting needs of Banks for compliance security and audit. Bolero also benefits the bank is providing a single multi-bank channel for all commodity trader customers while ensuring ease of interoperability and integration with the bank back office systems.
Bolero is designed to be fully interoperable and compliant with the ICC Process Standards and related SWIFT’s message standards.
The key benefits to a Commodity Trader from Bolero’s multi-bank service are:
- Reduction in administration, operation costs and fees
- Global visibility and multi-bank/multi-party consolidation available at any time
- Reduced time to cash (our customers have reported 5-9 days reduction in time to cash).
- Improved quality of information and data, significantly reducing discrepancies and enabling straight through processing (STP)
- Effective management and use of credit lines