Bill Graham, CEO of Proponix, a joint venture between Australia and New Zealand Banking Group (ANZ), Bank of Montreal, Barclays Bank and software vendor American Management Systems, talks about the company's model for the outsourcing of trade finance functions.
With a British, a Canadian and an Australian bank involved, Proponix has quite a disparate group of founders. Can you tell us a bit about how the venture was formed?
There were ongoing discussions that at various stages included a number of other banks about addressing several challenges that trade banks are facing in the marketplace. These are in a number of areas, the main one being to get costs down in the processing operations.
Both individually and jointly they reviewed a number of the different models in the marketplace and the broader trend towards outsourcing. But the only model out there for this area has been to outsource from one bank to another and there are very substantial client issues around that as well as integration and commitment issues.
They reached the conclusion this wasn't an avenue they wanted to pursue and quite frankly there hasn't been a great deal of outsourcing in the trade business from one bank to another.
Some of the larger global banks do have this kind of arrangement though, with smaller banks as clients, and one thing that the large players have talked about is spinning a processing centre or centres off into an independent company.
This is quite a logical step, but the challenge there is twofold. One is disengaging the organisational framework technology wise from their underlying operation systems. The second challenge is that even though they have separated a business unit to focus on its competencies as a core business model, it is still seen as part of the bank that spawned it. Unless they go to the extent that Proponix has and spin it off in conjunction with several other partners, then they still might have trouble attracting customers.
Proponix is owned by three banks at the moment and more are looking at coming on board, but even those three banks are in enough direct competition to give that sense of comfort that Proponix is independent and confidential with its information.
Will these new banks become partners with a stake in the business or more like clients?
We're in pretty serious discussions with a number of players and there was quite widespread interest in Proponix when it was initially proposed at last year's Sibos, and that goes from the serious to the curious. A common response we have been seeing is that once we went live and had something up and running this would act as a catalyst for these discussions to go further. Since the ANZ announcement we've been pretty busy.
Was there a particular reason why ANZ was the first among the three founders to go live in October?
Really it was a matter of timetable development and where we are. Melbourne was the first centre to come online with the phase-one technology and it was scheduled this way right from the beginning. In the first quarter of next year we will bring Toronto online and then move on from there. It is meant to be a staggered roll-out. Once we get to the stage where we have processing centres globally in operation 24/7 things are no longer processed locally in each centre, instead there will be a load balancing process based on whatever the service-level agreements (SLA) we have in place are.
Aside from the processing itself, Proponix also offers a web portal product. Are these being built into the banks' own offerings?
They will be. Last month we delivered the portal for system integration and user acceptance testing with ANZ. Ultimately ANZ, and the other banks, will introduce it into their internet based delivery systems. The stage we're at now we've just completed insourcing of their state of Victoria business, and we've also linked into business generated out of ANZ Online.
We're branding neutral. People are aware that we're doing it, it's no secret, but the branding will come from each bank and it will look like just another page on their site.
Do the banks have an opportunity to add different trade services to differentiate themselves, or do all banks that use Proponix by definition have a similar offering?
That's one of the key issues we considered when setting up Proponix, and so the whole client management aspect remains with the bank. We truly are the back shop - we just do the work in that area and provide the information.
You also offer Letter of Credit processing and document imaging. How does this fit in relation to what Bolero is doing?
Bolero at this point is more of a communication link - another step on from SWIFT, which is their main partner at this point. Bolero is really linking between various players in the supply chain and from what I've seen it seems to be fairly substantial players. Where we fit in is if we were working with one of the banks that are a Bolero participant and they were executing transactions using their process then we would just link into that with our middleware so as the transaction unfolds it would still eventually be processed by Proponix. We have the built the architecture to make this link easy to implement.
It seems to me that Bolero is mainly cutting out the traditional paperwork among participants that eventually led to a bank processing a trade themselves. Do you see Proponix as playing a complementary role with Bolero?
I have no doubt that Bolero will become one of the few major players in the trade industry and we will at some stage be linked into them as the industry does change. But I just don't see it changing that fast. We've seen some products out there that are dependent on the industry changing rapidly but I don't see it happening. When I look at the complexity and the nature of what trade is, especially the documentary side of it, it's a pretty complex animal to be changing overnight. It's not viewed as the same thing by all players.
