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December 4, 2021

UniCredit, first bank ready to offer Bank Payment Obligation to business community

In a first for the Romanian banking market, UniCredit Bank is offering a new payment instrument – the Bank Payment Obligation (BPO) – to the business community. The digitalization and fluidization of international trade transactions will impose BPO as an interbank instrument of reference that ensures typical international trade transaction payments in line with pre-agreed conditions, after the electronic comparison of delivery data (in relation to the delivery information requested for the payment). In essence, BPO can be seen as a hybrid between the documentary letter of credit and the simple payment after delivery, combining the advantages inherent in each of these payment solutions used in international trade.

Defining in BPO’s case is the fact that the irrevocable payment commitment is assumed by the issuer bank toward the beneficiary bank, while in the case of the documentary letter of credit the beneficiary is the seller/exporting company. The novelty that this instrument brings is represented by the switch from manual comparison to electronic comparison of delivery data, the participating banks using a data comparison application. In this sense, UniCredit Bank has implemented the electronic data comparison application offered by SWIFT – Trade Service Utility.

The advantages for the clients that choose to use this instrument as a payment solution for international trade transactions mainly consist of the allaying of risks, through the structuring of conditions included in the BPO, but also the guaranteeing of the payment through the issuing of the irrevocable and independent payment commitment. Secondly, the automatic comparison of data offered by the seller ensures enhanced processing speed, while the direct receival of delivery documents from the seller gives the buyer quick access to the goods/services purchased. With no operating costs related to document processing being involved, BPO entails low costs in contrast to the typical costs of documentary instruments, also representing a flexible financing solution through the discount possibility.

“BPO combines the security character offered by the documentary letter of credit with the ease of simple payments. UniCredit is among the first European banking groups that have opted to implement this financial instrument, its activation and the first transactions being confirmed in Germany and Italy in 2014 and 2015. Benefitting from the Group experience, we are now ready to offer this innovative solution, which is in line with the newest industry trends and technologies, to our clients in Romania. Given the specificity and characteristics of this payment instrument, we are also taking into account the possibility of expanding the offer toward companies that are not our bank’s clients for the time being,” UniCredit Bank Head of Trade Finance Cristina Bunescu stated.

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