Transaction Banking

BAFT Releases New White Paper on Transaction Banking Sustainable Finance Product and Reporting Matrix

WASHINGTON – BAFT, the leading global financial services association for international transaction banking, today released a new white paper, Transaction Banking Sustainable Finance Product and Reporting Matrix. The paper provides guidance on transaction banking sustainable finance products currently being offered to both corporate and financial institution clients.

The reporting matrix is intended to capture, consolidate and display in a simplified, readable format the industry best practice for labeling sustainable finance transaction banking products. Similarly, it highlights the types of reporting necessary for each type of ESG-labeled product.

“The transaction banking industry needs more refined standards tailored to our specific products,” said Andy Price, vice president, international policy, BAFT. “Our hope is that this matrix will serve as a starting point for framework development and ultimately, improve the design of sustainable finance transaction banking products.”

“We believe this resource is the first of its kind, specific to the transaction banking industry, and can be used by transaction banking practitioners and clients looking to further educate themselves on what is currently available in the market, as well as novices looking to learn more about sustainable transaction banking best practices”, said Anna Plewinska-Pijl, director, FI transaction services Europe, ING .

The white paper and reporting matrix were completed with the help of BAFT’s working group on sustainable finance, as well as several industry professionals, including:

  • Nataša Kovač, ING
  • Natasa Pudic, ING
  • Anna Plewinska-Pijl, ING
  • Dorene Martinez, BNP Paribas
  • Kaushik Mukherjee, Wells Fargo
  • Laura Wilson, Investec
  • Maxwell Chesky, MUFG
  • Chithra Badri, CICB
  • Riaan Meyer, Royal Bank of Canada

BAFT intends to update the document as industry developments occur. Click here to read Transaction Banking Sustainable Finance Product and Reporting Matrix, or visit BAFT’s Library of Documents under BAFT Guidance and Industry Practice section at www.BAFT.org.

About BAFT

BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance.

BAFT Media Contact:
Blair Bernstein
Senior Director, Public Relations
[email protected]
+1 (202) 663-5468

Follow Us: @BAFT

BAFT Releases Second White Paper in ISO 20022 Series Focused on Best Practices and Guidance

The comprehensive report offers practical insights for a seamless transition to the global financial messaging standard

Washington, DC – BAFT, the leading global financial services association for international transaction banking, today announced the release of its second white paper in the ISO 20022 series, “BAFT ISO 20022 Migrations: Best Practices and Guidance.” The report provides critical insights, strategies, and recommendations for financial institutions navigating the migration to the ISO 20022 standard for electronic data interchange between financial institutions.

As the global financial services sector undergoes a major shift toward ISO 20022 adoption, this new white paper builds upon BAFT’s first publication in the series and aims to guide stakeholders through the complexities of the migration process. With the upcoming deadlines and global implementation efforts already underway, the white paper serves as an essential resource for financial institutions, fintechs, and payment service providers at different stages of the transition.

Key highlights from the white paper include:

  • Roadmap for Migration: A step-by-step guide outlining key phases of ISO 20022 migration, from preparation to execution.
  • Best Practices: Practical examples and case studies from industry leaders who have successfully migrated to ISO 20022.
  • Risk Management: Identification of potential risks and mitigation strategies to ensure a seamless transition.
  • Cross-border and Regional Considerations: Tailored advice for managing regional and jurisdictional differences during migration.
  • Technology and Infrastructure: Insights on how to update and future-proof existing infrastructure to comply with the new standard.

“We are committed to supporting the global financial industry as it transitions to the ISO 20022 messaging standard,” said Deepa Sinha, vice president of payments and financial crimes, BAFT. “This white paper offers not just guidance, but actionable strategies that institutions of all sizes can leverage to ensure a smooth migration. It also highlights the importance of collaboration between industry players to drive standardization and interoperability in the global payments ecosystem.”

ISO 20022 has emerged as the global standard for financial messaging due to its enriched data format, improved processing efficiency, and ability to support new products and services. The “BAFT ISO 20022 Migrations: Best Practices and Guidance” white paper focuses on how organizations can unlock these benefits while minimizing disruptions during the migration phase.

Click here to read BAFT’s ISO 20022 Migrations: Best Practices & Guidance. The white paper is also available within BAFT’s Library of Documents under the Guidance and Industry Practices section.

About BAFT

BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance.

BAFT Media Contact:
Blair Bernstein
Senior Director, Public Relations
[email protected]
+1 (202) 663-5468

Follow Us: @BAFT

BAFT White Paper Analyzes Digital Currencies and Financial Crimes Concerns

Washington, DC – BAFT, the leading international transaction banking association, has released a comprehensive white paper titled “Digital Currencies and Financial Crimes Concerns,” offering a thorough examination of the intersection between digital currencies and the challenges posed by financial crimes. This timely publication explores the evolving landscape of digital currencies and their implications for anti-money laundering (AML) and counter-terrorism financing (CTF) efforts.

As digital currencies continue to gain prominence in the global financial ecosystem, stakeholders are increasingly grappling with the potential risks associated with their use in illicit activities. BAFT’s white paper serves as a vital resource for financial institutions, regulatory bodies, policymakers, and other industry participants seeking to navigate this complex terrain.

“Digital currencies present both opportunities and challenges for the financial industry,” said Deepa Sinha, vice president of payments and financial crimes, BAFT. “While they offer innovative solutions for cross-border transactions and financial inclusion, they also pose significant risks in terms of financial crimes. Our white paper aims to provide a comprehensive analysis of these issues and offer practical recommendations for stakeholders to enhance their AML and CTF efforts in the digital currency space.”

The white paper delves into several key areas:

Overview of Digital Currencies: It includes an examination of digital currencies, as well as central bank digital currencies (CBDCs), including their characteristics, mechanisms, and adoption trends. By understanding the diverse nature of digital currencies, stakeholders can better appreciate their implications for financial crimes.

Risks and Challenges: Recognizing the inherent anonymity, borderless nature, and decentralization of many digital currencies, the paper identifies the risks they pose in facilitating money laundering, terrorist financing, fraud, and other illicit activities. It also highlights the challenges associated with effectively detecting and mitigating these risks within the existing regulatory framework.

Regulatory Landscape: The paper explores the efforts of global regulators to address AML and CTF concerns. It examines various regulatory approaches, including licensing requirements, transaction monitoring, customer due diligence (CDD), and information-sharing mechanisms, and evaluates their effectiveness in combating financial crimes.

Technological Solutions: It includes a discussion of the role of advanced analytics, blockchain analytics tools, artificial intelligence (AI), and machine learning algorithms.

Collaboration and Partnerships: BAFT examines the benefits of a collaborative approach to tackling financial crimes associated with digital currencies and the importance of partnership among financial institutions, regulatory bodies, law enforcement agencies and technology providers.

Future Outlook: The paper offers insights into emerging trends, regulatory developments, and technological advancements for digital currencies and financial crimes.

Click here to read BAFT’s Digital Currencies and Financial Crimes Concerns. The white paper is also available within BAFT’s Library of Documents under the Guidance and Industry Practices section.

About BAFT

BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance.

BAFT Media Contact:
Blair Bernstein
Senior Director, Public Relations
[email protected]
+1 (202) 663-5468

Follow Us: @BAFT

Podcast | Using Deep-Tier Supply Chain Financing’s Potential to Unlock Capital

To discuss the paper and better understand how DTSCF can promote financial stability, risk management, and sustainability, Trade Finance Global (TFG) spoke with Tod Burwell, President and CEO of BAFT.

Via Trade Finance Global by Tod Burwell and Deepesh Patel

Deep-tier supply chain finance (DTSCF) is an innovative financial solution with the potential to unlock financing for smaller suppliers deep into a supply chain by leveraging the credit risk of the anchor buyer.

The latest whitepaper from BAFT (Bankers Association for Finance and Trade) and the Asian Development Bank (ADB), “Deep-Tier Supply Chain Finance: Unlocking the Potential”, explores some of the more opaque aspects of deep-tier supply chains. 

To discuss the paper and better understand how DTSCF can promote financial stability, risk management, and sustainability, Trade Finance Global (TFG) spoke with Tod Burwell, President and CEO of BAFT.

BAFT is a member of the Global Supply Chain Finance Forum (GSCFF), an organisation established in 2014 to develop, publish, and champion a set of commonly agreed standard market definitions for supply chain finance (SCF).

DTSCF and its differences from traditional supply chain finance 

DTSCF, a variation of the traditional forms of SCF, has the potential to reach micro, small, and medium-sized enterprises (MSMEs) deep within supply chains by allowing them to finance their payables based on the credit risk profile of the anchor buyer. 

According to the BAFT and ADB whitepaper, a program must have several core elements to be considered DTSCF. For example, it must be related to trade finance, driven by the anchor buyer’s supply chain, occur post-shipment, and be predicated on an irrevocable payment obligation.

Burwell said, “DTSCF allows an original receivable to be discounted in parts at multiple levels, with the benefits transferring down the chain.” 

It is a distinct form of payables finance as tier 1 suppliers are typically the main beneficiaries of a payables finance structure. 

Benefits for anchor buyers, suppliers, and financiers 

From a buyer standpoint, DTSCF creates greater resilience and transparency in the supply chain by creating value for lower-level suppliers through reduced costs and fraud risks. 

Burwell said, “In a deep tier structure, your tier 2 supplier who has presented an invoice to your tier 1 supplier also gets the ability to discount that invoice, and the tier 3 supplier that has presented an invoice to the tier 2 supplier, and so forth down the line.” 

From the seller’s perspective, DTSCF provides better access to financing at lower rates driven by the anchor buyer’s credit rating. As this is extended down the chain, sellers at each level can access more favourable financing rates. 

From a financier’s perspective, with many currently not financing MSMEs, this presents a way to grow natural client bases due to the increased visibility of deeper-tier suppliers.

There is also an opportunity to link ESG reporting once deeper levels of the supply chain are connected.

Burwell said, “DTSCF creates more efficient operations, which can help lower costs. As we see more ESG creeping into the structure of supply chains, it enables these lower-tier suppliers to achieve compliance and reporting requirements in the context of that supply chain.” 

Core implementation challenges 

DTSCF builds on several of the core elements of traditional SCF. Unfortunately, inadequate secured financing infrastructure has prevented the widespread adoption of SCF in many markets. Without that foundation, many markets are not prepared for a deep-tier alternative.

Currency impediments are also factors. While tier 1 suppliers often deal in major tradable currencies, suppliers further downstream are likely to work with local currencies that can be subject to tight FX control regimes. 

Burwell said, “One big challenge is having willing participants. You are dependent on everyone in the supply chain to be open to being transparent with everyone else. You start

with the anchor buyer, but if you are the tier 1 supplier, you need to be willing to open up about your own supply chain to your buyer.”  

According to the whitepaper, complex and onerous onboarding procedures also hinder the scalability of supplier-led financing offerings. The cost and effort required to onboard suppliers, particularly MSMEs, can be prohibitive for lenders, making it difficult to extend financing to the deeper tiers of the supply chain.

Despite the challenges, there are case studies of successfully implemented DTSCF programs. 

Successful implementation case studies 

One operation in China had reached 9 levels down the supply chain, reaching $70 billion over several years, with the average invoice totalling $77,000. 

Burwell said, “The smallest invoice we came across in this program was $15. Traditionally, this would be unthinkable because many financiers are not interested in a deal if the ticket sizes are that small. But the point of this is to provide value at the MSME level, where you will have smaller and smaller ticket sizes. If it can work for a $15 invoice, it can work for anything.”

Another example is a bank with about 1000 suppliers on a blockchain-based platform that reduced onboarding time by 75%. Given that many consider the supplier onboarding process alone responsible for holding back SCF scaling, this is critical. 

Burwell said, “Having the right technology and the structure where each of the tiers are onboarding their own supplier networks; if you can reduce onboarding time by 75%, you have something.” 

Next steps to scale and fully realise opportunities 

To continue advancing DTSCF, the two most important next steps are education and developing consistent legal frameworks.

On the education side, the industry must continue to engage with and communicate DTSCF structures and benefits. The more organisations know about a utility, the more they use it, and the more innovation will be added to existing structures. 

On the legal side, it will be important to create consistent legal frameworks to enable DTSCF on a cross-border basis. While some structures are based on contract rights with irrevocable payment undertakings, others are based on negotiable instruments. 

Burwell said, “The heavy lifting for us is going to be looking at the legal frameworks and how we can better enable cross-border legal frameworks to standardise the client agreements and onboarding processes to achieve scale.” 

BAFT Releases New White Paper on Deep-Tier Supply Chain Finance

WASHINGTON – BAFT, the leading global financial services association for international transaction banking, and the Asian Development Bank (ADB) today released a new white paper, Deep-Tier Supply Chain Finance: Unlocking Potential, which highlights the potential for deep-tier supply chain finance (DTSCF) to bridge the trade finance gap, drive liquidity to the most underserved segments of the trade market and enhance visibility within global supply chains.

Deep-tier supply chain finance is an innovative financial solution with the potential to unlock financing for deeper tier suppliers, where small and medium-sized enterprises (SMEs) are prevalent, by allowing access to finance by leveraging the credit risk of the anchor buyer. DTSCF not only unlocks finance at favorable rates for deeper tiers in a supply chain, but it also promotes an ecosystem of financial stability, risk management, and sustainability throughout the entire supply chain.

BAFT and ADB developed this white paper to provide a shared view of DTSCF, to outline its features as a new technique in financing trade and supply chains, to define what DTSCF is and what it is not, and to offer necessary definitions and legal frameworks to make it a success at scale.

“We’re pleased to have been able to build on the initial work done by ADB on this subject to help identify the key considerations to successful deployment of deep-tier supply chain finance, which can be a useful tool to help address the persistent trade finance gap,” said Tod Burwell, president and CEO, BAFT.

“Deep-tier supply chain finance is an exciting innovation that has the potential to drive greater resilience in supply chains and unlock the potential for SME-led economic growth, job creation, and prosperity,” said Steven Beck, ADB’s Head of Trade and Supply Chain Finance Program. “The publication details the next steps required to overcome the challenges in scaling this innovation and we’re excited to tackle these with our public and private sector partners.”

Click here to read BAFT’s Deep-Tier Supply Chain Finance. The white paper is also available within BAFT’s Library of Documents under the Guidance and Industry Practices section.

About BAFT

BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance.

BAFT Media Contact:
Blair Bernstein
Senior Director, Public Relations
[email protected]
+1 (202) 663-5468

Follow Us: @BAFT

BAFT Announces New Women in Transaction Banking Initiative 2024 Global Annual Meeting

BAFT has launched its Women in Transaction Banking (WTB) initiative during its 2024 Global Annual Meeting in Orlando.

Via Trade Finance Global by Brian Canup

BAFT, the leading global financial services association for international transaction banking, has launched its Women in Transaction Banking (WTB) initiative during its 2024 Global Annual Meeting in Orlando.

The BAFT WTB initiative was established to promote gender diversity and inclusion within the transaction banking industry. The program, which aims to foster an environment where women can thrive and excel, will provide a platform for networking, mentorship, and professional development opportunities tailored specifically for women in transaction banking.

“At BAFT, we recognize the importance of gender diversity in driving innovation and success in the transaction banking sector,” said Deepa Sinha, vice president, payments & financial crimes, BAFT. “The launch of the Women in Transaction Banking initiative reaffirms our dedication to advancing the careers of women professionals in our industry and creating a more inclusive and equitable future.”

The program’s unveiling was held during the BAFT Global Annual Meeting, as it brings together industry leaders, policymakers, and stakeholders from around the world to discuss the latest trends, challenges, and opportunities in transaction banking.

As part of the WTB initiative, BAFT will organize a series of networking events, webinars, and a robust mentorship program designed to connect women in transaction banking and enhance their industry-relevant skills. Additionally, WTB will collaborate with member institutions and industry partners to drive meaningful change and promote gender equality throughout the transaction banking ecosystem.

“We are excited to launch the Women in Transaction Banking initiative and look forward to working closely with our members and partners to advance the representation and leadership of women in our industry,” Sinha said.