A Bank Payment Obligation (BPO) is an irrevocable undertaking by a buyer's bank (the Obligor Bank) to pay a supplier's bank (the Recipient Bank), provided that the trade data received from the supplier matches the trade data specified by the buyer in the BPO. The supplier's trade data can involve commercial, transport, insurance and certification information that it must deliver to be checked against the BPO trade data.
A BPO and Letter of Credit (L/C) are similar because the buyer's bank is the obligor in both cases. The payment obligation is triggered when the seller complies with all the pre-set conditions. The important difference is that the BPO relies on an electronic platform (Transaction Matching Application, or TMA) to verify the information, whereas an L/C requires the physical checking of documents by bank personnel. A BPO supports online exchange of transaction information rather than sending original physical documents.