Q&A with BAFT President and CEO Tod Burwell - Trade Treasury Payments

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Q&A with BAFT President and CEO Tod Burwell

Trade banks today are faced with a whirlwind of new changes and challenges. From tariffs and trade wars to digitalisation and data migrations, it can be a difficult space to operate in.

To help clear the air and learn more about what’s going on today in the trade banking space, Trade Treasury Payments put together this Q&A article with Tod Burwell, President and CEO of BAFT (Bankers Association for Finance and Trade). 

BAFT, is a global financial services association for international transaction banking, helping 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.

Now that BAFT has announced its separation from the American Bankers Association (ABA), what strategic changes have you implemented, and how do these benefit BAFT members worldwide?

We announced our plans to separate from the ABA, and we are on track for that separation to take effect later this year, likely sometime in the fall. There is a lot of work going into the transition. 

We have been focused on keeping our current work streams transparent and moving at the same pace as they have been, and we have not introduced any significant strategic changes yet. 

BAFT will still provide thought leadership, best practices advocacy, and industry education. Once we have formally completed this separation, we will revisit our strategic priorities, and there will be some exciting things coming down the road. 

How do you define resilience in today’s banking landscape, and how does cultivating this resilience now help shape the future of banking?

When I hear the word resilience, I think of how you respond to risks in the ecosystem in which you operate. That can apply whether it’s your personal life, your family life, your business, your company, and so forth. 

When I think about resilience from a banking and trade point of view, there are many new risks associated with new trading alliances, the risks associated with tariffs, and what those will do to disrupt supply chains. From a payments perspective, there has been a lot of innovation. New payment systems are emerging in different regions, and efforts have been made to connect different payment systems using advanced technologies. There has been a lot of disruption. 

The real key to resilience for a bank is being able to anticipate risks and understand where its own vulnerabilities are within its ecosystem. When something does happen, how well and how quickly can it respond to address the risk?

What developments in the digital trade space are most promising, and what challenges must be addressed?

The most promising development I’ve seen is some progress from a legal framework standpoint. A few more countries have adopted the Model Law on Electronic Transferable Records (MLETR) framework, which will underpin the legal standing of digital trade. What’s particularly important is that this has been happening in some G7 jurisdictions. So that’s progress. 

There has also been progress from a standards point of view. The ICC Digital Standards initiative (DSI) has done a lot of work to document the key trade documents and data elements, which is really important from an interoperability standpoint and a cross-segment standpoint. 

The technology has already existed to some degree; we are waiting for the other pieces to catch up, and a lot of the building blocks for digital trade are already there. 

One of the biggest challenges is still demonstrating to corporate clients the value proposition and where they find the benefits of their investment. How do they prioritise those investments based on the tools they need relative to other assets they have to make? That will take more time for us to prove. 

One of the risks I’m seeing with digital trade is the same type of risk we’re seeing with payments: fraud. If the good actors in trade are digitising, so are the not-so-good actors. How do you ensure that if digital documents are produced, your systems are secure enough? Which systems are reliable? These are new stressors that our members have to try to sort through.

The implementation of ISO 20022 represents a significant shift in cross-border payments. How is BAFT supporting members through this transition, and what benefits do you expect to materialise? 

With ISO 20022, the first thing BAFT did was have conversations with the early migrators. We were able to unpack the lessons that they learned from their migration process and create a guide for the banks coming behind them to benefit from the lessons that the early migrants learned. That was the first in a series of three papers that we produced. 

The second is a best practices guide around governance, data, testing, and all the other elements that a bank has to manage. That paper has been helpful for banks that need to understand what works and where there are still challenges. The third piece, which we are still working on, examines the compliance aspects of ISO 20022. 

I certainly cannot take credit for the success stories of the banks that have done this successfully, but we’re trying to help ease the pain and help the community learn from those who have already gone through this. 

We’ve been involved in some other interesting things in the payments world. These include changes in regulation, the connectivity of faster payment systems, and some of the risks associated with trying to connect disparate systems with disparate regulatory regimes and qualification schemes. 

We have been engaged with policymakers to address some of those imbalances and, hopefully, reduce some of the risks and friction associated with regulating these cross-border systems. That is going to be a long process, but so far, the policymakers we have spoken with have been supportive.

As global trade patterns evolve, how do you see the role of correspondent banking changing, and what should financial institutions be doing today to prepare?

Correspondent banking always faces one of the most consistent challenges, which is connectivity across a broadening ecosystem. It’s a never-ending challenge because new companies come up in new jurisdictions that still need connectivity to counterparts they have never dealt with. That’s the whole purpose of correspondent Banking. 

The question is, can the banks that have traditionally been doing correspondent banking provide connectivity for those new entrants to the ecosystem? Can they provide connectivity to counterparts who may be in entirely different jurisdictions? 

Now, you add to that changing trade lanes. If I have a client base that has typically been doing most of their business in one region, and now they’re entering another region, does my network facilitate that connection? 

That brings us back to the age-old issues of KYC and risks with certain types of companies, whether they be medium-, small-, or micro-sized companies. As more trade and payments change, this is a consistent challenge for all our members.

The banks that can have that connectivity to all parts of the globe and do it best will see the rewards.