The TSU: Putting Banks Back at the Heart of Trade Services

1. The TSU: Putting banks back at the heart of Trade ServicesCLACE conference, Panama5th June 2007nicolas.willard@swift.com

2. AGENDA • Setting the scene • How is international trade settled ? • What are the current market trends ? • Wh at do corporates need ? • How are banks responding ? • How is SWIFT helping ? The TSU • What’s in it for banks ? • Project status • TSU interface demo

3. AGENDA • Setting the scene • How is international trade settled ? • What are the current market trends ? • What do corporates need ? • How are banks responding ? • How is SWIFT helping ? The TSU • What’s in it for banks ? • Project status

4. Goods description 1 xyzxyzxxx xxxyxy $$$ ##% *&^%$#@! yxy xyx zwzuzuzyzt xrxfxy uxz xzxzxz zczczcz Terms of Delivery 2 Prince Terms of Payment 3 J. Welsh Place of jurisdiction and legal 4 Setting the scene The Sales Contract Export / Import –

5. Goods description 1 Terms of Delivery 2 Terms of Payment 3 Place of jurisdiction and legal 4 Setting the sceneTerms of Payment • The Payment terms determine • Price • Date of payment • Payment instrument • Discounts • Account details

6. Goods description 1 Terms of Delivery 2 Terms of Payment 3 Place of jurisdiction and legal 4 Setting the scenePayment instruments • Bank intermediation: • Documentary Letter of Credit • Collections • Limited bank intermediation • Payment in advance • Open Account

7. 100 8000 80 6000 60 USD bn 4000 % 40 2000 20 0 0 1950s 1970s 1980s 1990s % of global trade in L/Cs Value of global trade (USD bn) Source: Celent Communications Setting the scene: trends World trade grows as traditional trade service instruments decline: The rise of Open Account trading

8. Setting the sceneDrivers towards open account LESS BARRIERS TO TRADE BETTER UNDERSTANDiNG OF MARKETS Harmonisation Globalisation Open Account Internet Cost Pressure BUYER / SELLER COLLABORATION SHAREHOLDER VALUE REQUIREMENTS DEMAND FOR SUPPLY CHAIN EFFICIENCY

9. Setting the scene: trends More international trade on open account 3 % 5 % 11 % 81 % An estimated 81% of global trade is open account Source: Global Business Intelligence Corp report commissioned by Misys

10. AGENDA • Setting the scene • How is international trade settled ? • What are the current market trends ? • What do corporates need ? • How are banks responding ? • How is SWIFT helping ? The TSU • What’s in it for banks ? • Project status

11. Corporate needs • Get paid as early as possible (Exporter) • Get the goods ASAP + pay as late as possible (Importer) • I + E: Optimise working capital • Account payables (importer) • Account receivables (exporter) • I + E: Financing & risk mitigation • Pre-shipment (e.g.working capital financing) • Post-shipment (e.g.invoice discounting) • Currency hedging

12. AGENDA • Setting the scene • How is international trade settled ? • What are the current market trends ? • Wh at do corporates need ? • How are banks responding ? • How is SWIFT helping ? the TSU • What’s in it for the banks ? • Project status

13. Vendor Finance Cash Reporting & Consolidation LC – Issuance & Guarantees Receivables / Payables Finance Data Checking & Matching FX Hedging & Execution Working Capital Finance Tracking & Tracing Insurance Broking Others Others Others How are banks responding?Global Banks react with integrated supply chain solutions Financing (IT-) Services Risk

14. How are banks responding?Challenge for banks with current approach • Issues: • Lack of common standards • Restricted to own community • Difficult to get early access to information

15. AGENDA • Setting the scene • How is international trade settled ? • What are the current market trends ? • What do corporates need ? • How are banks responding ? • How is SWIFT helping ? The TSU • What’s in it for banks ? • Project status

16. Corporate Corporate Bank Bank SWIFT messages Trade documentation How is SWIFT helping: the TSU A centralised matching engine of trade-related transaction data BANK SERVICES Risk mitigation Financing Data checking outsourcing SWIFTNet TSU Standards Messaging Matching & workflow Rulebook Trade facilitators

17. PO Inv Transport document Transport document Transport document SWIFTNet Key data Key data Match Match Bank How is SWIFT helping?: the TSU High Level end-to-end flow Buyer Seller TSU Bank

18. AGENDA • Setting the scene • How is international trade settled ? • What are the current market trends ? • What do corporates need ? • How are banks responding ? • How is SWIFT helping ? The TSU • What’s in it for banks ? • Project status

19. What’s in it for banks ? • Increased revenue through early access to information • New product offerings • Enhanced existing product offering • Lower costs through • Shared infrastructure • Standards STP • Automated finance proposals (+ no re-keying) • Risk mitigation through • Matching

20. How does it all fit together? - Leveraging trigger points for supplier financing Increases timeliness of access to funds Benefits for Corporate Better price and/or higher credit limit Funding at confirmed stages Benefits for Bank Increases comfort, reduces risk and increases appetite Reduces number of discrepancies in commercial docs Provides service trigger points Notification to Bank of complete events and required actions Two data sources increases authenticity TSU Functions Baseline line item matching

21. AGENDA • Setting the scene • How is international trade settled ? • What are the current market trends ? • What do corporates need ? • How are banks responding ? • How is SWIFT helping ? The TSU • What’s in it for banks ? • Project status

22. Americas The TSU Banks 33 Trade Banks 17 countries EMEA Asia Pacific

23. TSU-Interface Demonstration (using screenshots in MS-Powerpoint)

24. Access to both “Live” and “Test” TSU environments TSU central infrastructure - LIVE TSU Interface Engine Live traffic on swift.tsu and swift.tsu.st InternalApplication(s) SWIFTAllianceGateway TSU Application SWIFTNet TSU central infrastructure - TEST TSU Interface Engine Test traffic on swift.tsu!p and swift.tsu.st!p TSU Application TSU-Interface(on WebStation) Bank

25. Initial Baseline Mismatch rejection TSU-Interface DemonstrationPush Through Scenario Bank A TSU Bank B Status Proposed Push Through Report Acknowledgement Baseline Re- submission (Twin) Established Baseline Report Baseline Report First Dataset Dataset Match Report Active Dataset Match Report Acknowledgement Mismatch notification Active FirstDataset (resubmitted) Dataset Match Report Dataset Match Report Active Baseline Report Baseline Report

33. Initial Baseline Mismatch rejection TSU-Interface DemonstrationPush Through Scenario Bank A TSU Bank B Status Proposed Push Through Report Acknowledgement Baseline Re- submission (Twin) Established Baseline Report Baseline Report First Dataset Dataset Match Report Active Dataset Match Report Acknowledgement Mismatch notification Active FirstDataset (resubmitted) Dataset Match Report Dataset Match Report Active Baseline Report Baseline Report

34. Business Benefits:Opportunity for pre-shipment finance (PO issuance) Competition between banks Buyer Seller 1. PO 2. PO data 2. PO data 7. Proposition for finance Buyer’s Bank Collaboration between banks Seller’s Bank 3. Initial Baseline 4. Push Through & Baseline Twin TSU 6. MatchReport 6. MatchReport 5. Match

41. Thank you