Commerzbank and UniCredit complete first BPO live transaction in the UK

The transaction covers the export of chemicals from Ireland to Italy. Commerzbank’s customer, the supplier, is Shannon-based chemicals company, Heraeus Metal Processing. The buyer, UniCredit’s customer Ecocat Italia Srl, is an automotive parts producer in Genoa.

The reasons for Heraeus Metal Processing to settle the transaction by BPO are various: payment assurance, from establishment of baseline, before shipment, until maturity of extended payment terms, and cost savings by faster and more efficient processes due to electronic handling of data. Previously, transactions between the two were handled by open account invoice, secured by a bank guarantee.

Commerzbank processed its first two live transactions supported by a BPO, one for a German SME and one for an international group based in Belgium, in 2014. Since then, the bank has successfully settled BPO transactions with SMEs, large corporates and multinationals.

For UniCredit, this is the latest in a number of landmark BPO deals in recent years. In 2014, UniCredit completed the first ever BPO transaction between a German and a Japanese company. Recently, UniCredit completed the first Romanian BPO. As the first bank to facilitate a BPO transaction in Germany, Italy and Romania, UniCredit has since extended coverage to countries such as Bulgaria.

With the particular backing of the ICC Banking Commission and SWIFT, there has been growing demand for, and an increasing number of, BPO transactions, as a proven digital settlement tool. The solution consists of the irrevocable undertaking of the buyers bank towards the sellers 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. While the BPO is a new instrument in Trade Finance, it is also an enabling framework for supply chain finance, following the requirements of the market for providing liquidity and mitigating risk along the supply chain.