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Oh, that's what we can do with the TSU!

Let's remind ourselves, the SWIFTNet Trade Services Utility (TSU) is the result of an initiative started by the banks. The SWIFT Board and twelve banks, among them some of the most international and influential players in the trade services space, decided in late 2002 to form the Trade Services Advisory Group (TSAG) and work on a solution that would help banks get back into the loop of trade transactions, including those under an open account basis. In recent years many banks have known about the so-called open account transaction only when a payment was required – too late to offer any value add services, too late to make any money on it.

At the risk of over-simplifying matters, let's say that trade transactions can be divided into Traditional Trade, with its well-known chargeable products (LCs, collections, etc.) and Open Account, which alone and with no serious thinking about their role leaves banks with significantly less revenue-earning opportunities.

So remind me again? What can I do with the TSU?

Well, it's up to you really!

The sky is the limit. Banks can design a whole set of services around the financial supply chain that would use the TSU behind the scenes (important reminder: banks' corporate customers do not need to know that their favourite banks' services are powered by the purely inter-bank TSU). One way would be to adapt a good Web-based solution (e-banking, customer front-end, or any other name you would like to use) fully integrated with the TSU, with which banks can first offer foundation services such as online preparation and collaboration between the buyer and supplier on the purchase order (PO) terms, electronic delivery and approval of the PO, online preparation of invoices by the supplier followed by data matching, electronic discrepancy advising, reconciliation, etc. With the real meat of the service when the parties can start to use these data flows to trigger payments, FX risk mitigation, pre- and post-shipment financing, reverse factoring, etc.

Sounds easy, so why do some banks remain sceptical?

For once, banks did not necessarily have the right skills set to handle corporate-oriented supply chain issues. This is changing, as more financial institutions recruit people from traditional supply chain players such as logistics and transportation companies to help them handle this new trend, but acquiring this expertise is going to take time. These skills are crucial in managing the new relationships banks need to have with their clients. Banks need to have a deep understanding of their corporates' needs; they need to understand how their customers work and what their actual financial supply chain needs are. It may involve a change of mind set as well, with more customer-focused operations building value add services that would suit their clients' needs on the one hand and generate revenue for them, on the other. But more than anything in these fairly early days, banks need to pilot their new services with some of their customers - then test, learn and start again.

 

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