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Connie Leung Head, Trade & Supply Chain Markets, Asia Pacific SWIFT

New Methods in International Trade for SMEs – Application of Supply Chain Management and Electronic Data Interchange 中小企國際貿易新方法－應用供應鏈及電子資訊交流方案. Connie Leung Head, Trade & Supply Chain Markets, Asia Pacific SWIFT. Agenda. Setting the scene. What is the Trade Services Utility (TSU)?.

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Connie Leung Head, Trade & Supply Chain Markets, Asia Pacific SWIFT

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  1. New Methods in International Trade for SMEs – Application of Supply Chain Management and Electronic Data Interchange中小企國際貿易新方法－應用供應鏈及電子資訊交流方案 Connie Leung Head, Trade & Supply Chain Markets, Asia Pacific SWIFT

  2. Agenda Setting the scene What is the Trade Services Utility (TSU)? Collaboration with Tradelink Supply Chain financing by HKTDC World SME Expo Dec 2008

  3. Leader in secure global financial communication S W I F T Society A co-operative organisation serving the financial industry Worldwide A provider of highly secure financial messaging services Interbank Financial The financial standardisation body Telecommunication HKTDC World SME Expo Dec 2008

  4. SWIFT figures (December 2008) 3.5 billion messages per year (2007) 8,612 customers 209 countries Average daily traffic 16 million messages Peak day of 17.1 million messages , 30 Sep 2008 HKTDC World SME Expo Dec 2008

  5. Setting the sceneGrowth in international trade US$ billions CAGR E.Europe 25% Asia 15% US 5% EU 3% Sources: The Economist HKTDC World SME Expo Dec 2008

  6. Setting the sceneMigration to Open accounts • International trade continues to grow as economies around the globe strengthen • SWIFT messaging shows an increase in Cat 1 / 2 payment volumes whilst Cat 4 / 7 trade volumes are stagnating. This is a visible confirmation of the global shift to open account Source: SWIFT Traffic Watch HKTDC World SME Expo Dec 2008

  7. Open Account L/Cs Collections TSU Other Raising ambitionsThe TSU focuses on Open Account Traditional trade finance Importer Exporter Increased risk for the exporter Increased risk for the importer Open Account Collections L/C Payment in advance Business opportunity 81 % HKTDC World SME Expo Dec 2008

  8. PROCESSING EFFICIENCY Risk • Compliance • FX hedging • PO authentication Services • Cash forecasting • Discrepancy handling • Dispute management In-Sourcing • Document preparation • Managed a/c payables • A/c Reconciliation Order Make Ship Invoice Receive Pay Sell Collect Inventory finance Pre-shipment finance Post-shipment finance Receivables finance LIQUIDITY MANAGEMENT Setting the sceneDrivers to Open account HKTDC World SME Expo Dec 2008

  9. Setting the sceneDrivers to Open account LESS BARRIERS TO TRADE BETTER UNDERSTANDNG OF MARKETS Harmonisation Globalisation Open Account Internet Cost Pressure BUYER / SELLER COLLABORATION DEMAND FOR SUPPLY CHAIN EFFICIENCY SHAREHOLDER VALUE REQUIREMENTS HKTDC World SME Expo Dec 2008

  10. TSU messages TSU messages Setting the sceneSWIFT trade services market offering Guarantees (MT 76x) Collections (MT 4xx) Documentary Credits (MT 7xx) Buyer’s bank Seller’s bank TSU Lodge / Push Through MT-based MX-based HKTDC World SME Expo Dec 2008

  11. Buyer’s bank Vendor’s bank 4. Settlement 3. Documents 5. Acceptance of documents by buyer 6.Payment 4. Payment Settlement 3. Documents Risk mitigation Financing Information 2. Shipment of goods 1. Creation of PO and transmission to vendor Buyer Vendor Logistics Trigger points Setting the sceneTraditional documentary credit workflow High transaction visibility reduces risk and cost of finance HKTDC World SME Expo Dec 2008

  12. Buyer’s bank Vendor’s bank Settlement Setting the sceneOpen account workflow 1. Creation of PO and transmission to vendor 2. Shipment of goods 4. Vendor presents documents to be checked by buyer Buyer Vendor 5. Acceptance of documents by buyer 3. Documents Logistics Trigger points Low transaction visibility increases risk and cost of finance HKTDC World SME Expo Dec 2008

  13. Agenda Setting the scene What is the Trade Services Utility (TSU)? Collaboration with Tradelink Supply Chain financing by HKTDC World SME Expo Dec 2008

  14. Americas Asia Pacific TSU Pilot Banks – 2004/5 18 Trade Banks 8 countries EMEA HKTDC World SME Expo Dec 2008

  15. PO Inv Transport document Transport document Transport document SWIFTNet Key data Key data Match Match Bank Bank SWIFTNet Trade Services Utility: Industry standards, shared application, community engagement Buyer Seller TSU HKTDC World SME Expo Dec 2008

  16. TSU Benefits to Bank and Corporate (Release 1.0) HKTDC World SME Expo Dec 2008

  17. TSU Benefits to Bank and Corporate (Release 2.0) HKTDC World SME Expo Dec 2008

  18. Trade Services Utility A Growing Community of Banks and Vendors 1 3 7 3 9 1 2 5 1 4 3 2 7 6 3 4 1 1 2 3 1 1 2 1 2 2 2 1 1 1 82 Trade Banks 95 BICs 30 Countries / Territories HKTDC World SME Expo Dec 2008

  19. Laurentian Bank • Bank of Montreal • The Bank of New York Mellon • Citibank • First National • PNC • JP Morgan • Branch Banking and Trust Co. • Banco do Brasil • Bradesco • Bank Itau • Banco Galicia TSU banks in the Americas (13) • Banco Credito del Peru HKTDC World SME Expo Dec 2008

  20. TSU banks in Asia Pacific (28) • ICICI Bank • Bangkok Bank • Kasikornbank • KEB • Shinhan Bank • Hana Bank • Woori Bank • Standard Chartered • Bank Danamon • Bank Mandiri (Persero) • ANZ • Hang Seng Bank HKTDC World SME Expo Dec 2008

  21. ABN Amro • ING • Rabobank • UBS • Swiss Re • Bayerische Landesbank • Commerzbank • Deutsche Bank • Dresdner Bank • HypoVereinsbank • LBBW • Sparkasse Bremen • Handelsbanken • RBS • HSBC • Bank Austria TSU Banks in EMEA (41) – CEE, BENELUX, Nordic, UK (19) CEE BENELUX, Nordic, UK • DEXIA • Fortis • KBC HKTDC World SME Expo Dec 2008

  22. Garanti • Banco Popular • Caja Madrid • Banco Santander • BBVA • La Caixa • Banco Sabadell • Bankinter • BMCE • FirstRand • Standard Bank TSU Banks in EMEA (41) – Southern Europe, MEA (22) France, Italy, Greece Spain, Turkey, MEA • Calyon • BNP Paribas • Société Générale • Crédit Agricole Ile-De-France • Crédit Mutuel-CIC • Banca Popolare di Sondrio • Banco Popolare • Unicredit • National Bank of Greece • EFG Eurobank • Commercial Bank of Dubai HKTDC World SME Expo Dec 2008

  23. Agenda Setting the scene What is the Trade Services Utility (TSU)? Collaboration with Tradelink Supply Chain financing by HKTDC World SME Expo Dec 2008

  24. Market situation • Buyers/Sellers • Too many trade options : LC, OA, TT, Collections • Manual vs technology : own/banks systems, third party • No inter-operability of data, re-enter most of the time • Banks • Loss of revenue : LC vs Open Account • Lack of automation in OA, system only good for LC • Supply chain services are in demand • SWIFT • Bank-to-bank Document matching engine i.e. TSU • Bank need to build customer front end • Issues • High costs to invest into the customer front ends • Uncertain about the requirement from the industry HKTDC World SME Expo Dec 2008

  25. Trade Services Utility Possible business model: Trade hub for OA business 1. PO Inspection Quarantine Government Services Warehouse Airliners Shippers Bonded Warehouse Transaction Transport/CY Forwarder 1.1 P O Overseas Buyer 3. Doc preparation Seller in HK Accept/reject Status update 1.1 PO Bridge between Trade hub and banks 1.2 PO 1.2 PO Buyer’s bank 2. Established baseline Seller’s bank in HK 2. Established baseline 4. Match report 4. Match report HKTDC World SME Expo Dec 2008

  26. 11 December, 2008 New Trends in International Trade for SMEsA Seamless Global Supply Chain Management Solution

  27. About Tradelink 2008 Publicly listed and traded on the Main Board of The Stock Exchange of Hong Kong Granted license (2004-2008) to continue provisionof government document e-submission services Government becomesa shareholder Tradelink Beijing Established 2005 2003 2004 1994 Established inSep 1988 Selected by the Government as the developer and operator of DTTN 1992 Granted exclusive franchise (1997– 2003)to providee-submissionservices forcertaintrade-related documents 1988

  28. Government and Industry Expert Support Key players in the trading sector, including trade associations, terminal operators & financial institutions The HK SAR Government Public Shareholders 43.80% 12.29% 43.91% • Other Shareholders: - • 21% The HK SAR Government • 28% Trade Associations 51% 100% Digital Trade and Transportation Network Digi-Sign Certification Services Limited Building trust in electronic services with Digi-Sign security solutions The digital express link to you business partners worldwide

  29. Logistics ServicesProviders Importers Exporters Trading Community Freightforwarders Carriers Manufacturers Tradelink’s Operating Mode TradelinkTransaction fee+Gov’t fee+e-submission of trade related documents Gov’t fee+e-submission of trade related documents The HKSAR Government e-confirmation e-confirmation • Document checking and validation • Secure communication channel • 7 x 24 electronic interface • Document status tracking • Hotline & onsite technical support and other customer services • “Paper-to-electronic” conversion service • Over 20 million transactions in 2007 Security Solution

  30. Tradelink’s Government Services

  31. Tradelink’s Commercial Services

  32. DTTN – the Solution Meeting the Industry Challenge Enhance Competitiveness: A Common Digital Platform to Facilitate Information Exchange Industry Challenges: Disjoined Communities

  33. Electronic message routing services Electronic message transformation services Portal services Data inheritance services Statistical and analytical reporting services Information security services Community Role of the DTTN Sellers Buyers FreightForwarders InspectionAgencies Banks &FinancialInstitutions Government& Agencies Carriers InsuranceInstitutions Terminals DTTN Key Services Offering

  34. Purchase Process Delivery Local and OverseasTransportation Government Trade Documents Financial Settlement DTTN to Support the Whole Supply-Chain Support over 88 major documents related to trade, logistics and finance for both import and export business processes Purchase / Sales Order, Order Confirmation Packing List / ASN, Commercial Invoice,Inspection Certificate, Insurance Booking, Shipping Order, Arrival Notices,Transport Documents - Master / HouseWaybill - Sea / Air, Cargo Receipt,Transport Set, EIR, Delivery / Release Order Export / Import License,Customs Clearance,Certification of Origin etc. Letter of Credit, Company Guarantee, Bill of Exchange,L/C collection Letter; Document Arrival Notice

  35. Goods Status (RFID / EPCGlobal) 6. Shipment Status (XML) Goods Tracking Locations 5. BL (XML) 2. SO, CI, PL (XML) Forwarders 3. Master SO (XML) 4. Master BL, Shipment Status Physical Delivery (XML) 1. PO (X 12) Buyer 1 DTTN 1. PO (Excel) 4. Shipment Status Seller (X 12) 2. SO, CI, PL (Excel) 5. BL (Excel) 6. Goods / Shipment Status 4. Master BL 3. Master SO (Web Services/XML) Shipment Status Application 3. Master SO Carriers (EDIFACT) 6. Shipment Buyer 2 Service Status (Web) Provider 2 4. Master BL, Application Shipment Status (EDIFACT) Service Provider 1 SO - shipping order CI - commercial invoice PL - packing list BL - bill of lading DTTN Interconnection Example(Purchase to Delivery)

  36. Case Study: A Buyer in UK and its suppliers in H.K. and China 2. Purchase Order 3. Purchase Order 10. Clean Document set 7. Bill of Lading TDS 9. Invoice, Packing 4. Invoice, Packing List, List, Bill of Lading Shipping Order Buying Office Suppliers 8. Invoice, Packing List, Bill of Lading 1. Purchase Order Goods Delivery 11. Invoice, Packing 11. Invoice, Packing Shipping Order 5. Invoice, Packing List, List, Bill of Lading, List, Bill of Lading, e/CO e/CO 6. Bill of Lading 12. Invoice, Packing 12. Invoice, Packing Freight Freight List, Bill of Lading, List, Bill of Lading, UK Buyer Forwarder Forwarder e/CO e/CO Physical Data

  37. Extending Our Reach with Partners around the World • Pan Asian E-Commerce Alliance • Singapore, PRC, Thailand, Korea, Japan, Macau, Malaysia • Other Regions: • Australia, France, Spain, Mexico, United States, The Netherlands

  38. The Missing Piece – Financial Services, e.g. Payment E-Document Exchange Trading Processes Chamber of Commerce Outbound Logistic Freight Forwarder Business Matching Receive PO Insurance Customs Terminal Payment Production Inspection

  39. The Enhanced Payment Layer –Collaboration with SWIFT DTTN to provide possible docs/messages supporting transactions for payment/LC/open account related transactions

  40. Enable electronic document exchange between banks and traders E-Trade (from PO to Payment) Bonded Warehouse Transaction Inspection Quarantine Transport/CY Airliners Shippers Forwarder Government Services Warehouse Buyer Seller Bank Bank

  41. The Bridge between the Trading Industry and Banks • Tradelink/DTTN-SWIFT connection • An electronic gateway for the communication between banks and traders • Documents can be submitted to banks via the connection • E.g. Purchase Order, Commercial Invoice, Shipping Documents & etc • A single channel to communicate with all trading parties, including banks • Minimize data entry efforts • Minimize data entry error • No constraints on collection time and collection location

  42. Benefits to Banks’ Customers • A one-stop service for the whole trading process • Facilitate data exchange among the involved parties • Provide data inheritance and avoid duplicated data input • Keep track of trading document status and invoice/payment status at a glance • Increase transaction visibility • Improve cash flow management • Improve productivity throughout the supply chain • Obtain more comprehensive services from bank

  43. Thank You!!

  44. Agenda Setting the scene What is the Trade Services Utility (TSU)? Collaboration with Tradelink Supply Chain financing by HKTDC World SME Expo Dec 2008

  45. PROCESSING EFFICIENCY Risk • Compliance • FX hedging • PO authentication Services • Cash forecasting • Discrepancy handling • Dispute management In-Sourcing • Document preparation • Managed a/c payables • A/c Reconciliation Order Make Ship Invoice Receive Pay Sell Collect Inventory finance Pre-shipment finance Post-shipment finance Receivables finance LIQUIDITY MANAGEMENT Trade Services Utility Trigger points for liquidity management and processing efficiency TSU TSU TSU TSU TSU TSU TSU HKTDC World SME Expo Dec 2008

  46. JPMORGAN - G L O B A L T R A D E S E R V I C E S Supply Chain Financing - Supplier Presentation STRICTLYPRIVATEANDCONFIDENTIAL

  47. Thank You HKTDC World SME Expo Dec 2008

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