Under the banner Proponix, the three banks and the software company which teamed up last August, now provide online transaction processing for letters of credit guarantees, bankers' acceptance, documentary collections and reimbursements.
Through an Internet-based trade portal, banks and their customers will be able to initiate and track their trade transactions online. Proponix' back-office engine for processing trade finance services runs on a proprietary application called ObjectTradeLine.
Proponix, which is headquartered in Toronto, Canada, will also operate processing centers in Melbourne, Australia, from next month and Hong Kong in early 2002. It also has a data center in Sterling, Virginia.
The benefits Proponix claims global trade banks can gain from its services are those often given for the outsourcing of any technology-driven process: cost reduction per transaction, replacing fixed cost with variable costs tied to volumes, improving processing speed and turnaround, reducing exposure to technology selection and ongoing capital expenditure, improved client functionality, information, and service via the Internet.
Bob Johnson, executive vice-president, head of global trade, FleetBoston Financial, says these benefits are particularly relevant for trade finance. "An outsourcing model that allows financial institutions to separate customer service from back-office processing is an attractive option for the global trade finance industry. Many trade banks around the world will be taking a serious look at this alternative over the next 12 months.
"We recognized the need to break through the traditional barriers of outsourcing by delivering a flexible, neutral service that will meet the needs of the trade finance industry and independent research supports our belief," says Bill Graham, president and chief executive officer of Proponix. "This is a partnership between leading global banks and the premier trade services software company. We understand what our customers' need and Proponix is the only company to offer end-to-end outsourcing services, not just on high volume items."
A total of 28 major banks from North America, Europe, Asia and Australia were surveyed last month by market researcher Global Business Intelligence (GBI) on topics ranging from how much they spend annually on global trade/finance operations and key challenges facing the industry, to greatest benefits and barriers of outsourcing their global trade processing. Results of the independent research commissioned by Proponix are being released as part of the company's global launch.
Rapidly changing technology in the global trade arena, and choosing appropriate software and hardware systems, are the primary concerns for trade banks, ahead of growing revenue and improving profitability, according to the survey.
A majority of survey respondents believe outsourcing global trade transaction processing could save their banks 20% to 30% or more per year and reduce their bank's exposure to investing in the wrong technology. About half of the banks surveyed also said they spend more than $10 million per year on global trade processing. Online transactions processing for international trade banking services is an estimated $10 billion market.
Other key findings from the research include:
* 34% said technology is their biggest challenge, followed by growing revenue (31%) and improving overall profitability (27%) of their operations;
* The three "most urgent" technology projects for global trade which the banks have completed recently, or plan to do soon, are: building Internet front-end capabilities; installing new or updating back office software; and updating legacy computer systems to meet customer demands;
* The largest benefit of outsourcing is lowering the price of each transaction (62%);
* Of this group, 100% said outsourcing would cut costs, with 41% stating the savings in the 20 to 30% range and a further 12% stating the savings would exceed 30% annually;
* More than half (52%) said outsourcing gives the bank access to the appropriate technology;
* The global banks acknowledged outsourcing could have customer sensitivity issues (62%) and create problems with their existing, or legacy, computer systems (46%). But these barriers could readily be overcome, the research found;
* Two thirds (65%) said they would prefer a "variable charge", or pay what you use, by the third-party outsourcing vendor.
