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In a recent blog, we provided an update on the activity of the ICC e-compatibility sub-working group. An additional activity has now been added under the auspices of this project with the introduction of a BPO sub-stream.

With the advent of Distributed Ledger Technology (DLT) and Blockchain applications, there is a further need for a form of risk mitigation. It is the view of the Digitalisation Steering Committee that BPO can serve as a framework for risk mitigation in these emerging technologies.

For this purpose, and to make the BPO more relevant to the industry, the Banking Commission Executive Committee approved the formation of a dedicated sub-stream of the ICC Working Group on Digitalisation to evaluate whether the existing BPO rulebook needs to be modified and revised.

Mike Quinn of JP Morgan, who will work with David Meynell, will chair the group. A core team of participants will be identified with the skills and experiences to help in commercialising the BPO and positioning BPO as an enabler of trade finance being intermediated on future technologies such as distributed ledger technologies.

For this purpose and to make the BPO more relevant to the industry, it is proposed to evaluate whether the existing BPO rulebook needs to be modified and revised.

Objectives and scope of work

It is proposed to create a sub-stream to the digitalisation working group. The following are possible activities and actions the proposed BPO sub-stream deems necessary to be taken:

1) Marketing and Awareness of BPO in its current state

1. Publish materials through to the National Committees that will be helpful for their membership to understand and implement the Bank Payment Obligation.
2. Leverage industry organizations to communicate to the banking community, and the corporates who participate in global trade, the merits of the BPO and how it assists in digitisation of Trade Finance. 
3. Making members of the working group available to National Committee members to assist in their evaluation and consideration of the BPO. 

2) Revision of the URBPO to include the roles and responsibilities of buyers and sellers and modify it to address conditions within DLT technologies that create obligations:

1. Assemble a subgroup of the Commercialisation Group to review the existing URBPO to recommend revisions which will include the buyer and seller within the rules (including, but not limited to, the four corner model for Supply Chain Finance); 
2. Working with industry initiatives that are exploring distributed ledger technologies (DLT/ Blockchain) to understand and define "conditions" in the envisioned DLT enabled supply chains which would create an obligation to pay and facilitates financing;
3. Short-term (within six to nine months) publish a framework of a revised URBPO which can guide the future developments of digitized trade without delaying the move from experimentation with DLT to scalable programs in market; and
4. Longer term complete a revised URBPO sufficiently vetted and approved by National Committees including the above criteria.

3) Address, in conjunction with the Digitalisation Working Group technology standards group, data standards that improve the Trade Service Utility (TSU) and/or lay the framework for smart contracts and other data enablers to support DLT.

1. Recommend and incorporate changes to the TSU which address current limitations which have inhibited market acceptance (i.e., Vessel names/ identifier; edits of ports). 
2. Based upon the learning of "conditions", incorporate data standards that reflect these conditions (i.e., defined smart contracts; APIs from "oracles"; theoretical rather than practical today). 

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