Article

by Mark Ford

The Internet has spawned several solutions to move trade financiers' back offices online, with solution providers now providing a bewildering range of multi-bank, multi-regional, multi-country, multi-base currency, multi-branch and multi-lingual environments. Several front-end solutions, meanwhile, provide extensive trade finance functions for bank customers, such as import letters of credit, export L/Cs, guarantees, payments and collections.

Certainly these solutions are sophisticated, but perhaps the biggest challenge in the ongoing development of the paperless L/C goes beyond the development of bank-to-bank systems and, separately, corporate-to-bank systems. That challenge is to develop multi-bank trade finance solutions designed with the bank's customers in mind, which provides them with one platform over which they can deal with any bank rather than having to cope with several banks operating different trade finance platforms.

A useful definition of the type of multibank platform is provided by Chairman and CEO of Canada's GlobalTrade Corporation (GTC), Jacob Katsman. "With a truly multi-bank platform, the corporate client directs information electronically, in a standard format, to any bank in its banking group, and receives information electronically, in a standard format, from any bank in its bank group. Participation in such a platform is not restricted by price or the need for special hardware or software. Access is open and secure to meet banking standards," he says.

Consolidated access

Last year, Misys claimed to be the first trade finance solution specialist to launch multi-bank architecture for banks and their corporate customers. The Londonbased provider of application software and services to the banking, capital markets and healthcare industries said its hosted environment complements the existing capability of Misys Trade Portal and helps banks provide more valueadded services to corporate customers.

Misys Trade Portal for Multi-Bank is a secure hosted service that the company says provides banks and their customers with a comprehensive means of processing, reviewing and managing all their transactions, including L/Cs, collections, guarantees, financing or open accountbased transactions, through a single web-based portal.

Misys claims to offer corporate clients currently handling several banking relationships consolidated access to and an overview of international trade transactions to multiple banks at the same time through a single source.

Misys Trade Services' head of product management, Oliver Berthier, appears sceptical about other offerings labelled "multi-bank": "The feedback we are getting from both banks and corporates is that the few existing solutions that claim to be multi-bank, are not meeting their functional demands well enough," he says. The company says it has developed its hosted multi-bank service in partnership with a number of major European financial institutions.

As a hosted service, Misys says its solution minimizes the initial investment both banks and corporates have to make and reduces the overall total cost of ownership.

In June 2008, Canada's GlobalTrade Corporation (GTC) announced that one of the world's largest forest industry groups had centralized its global L/C handling using the @GlobalTrade Export LC System. According to GTC, a total of 21 business units in the Finnish Metsäliitto Group - which supplies wood, wood products, pulp, board and paper, and tissue and cooking paper - are now live on the system. The group's major banks are also live on the system, which is hosted by HypoVereinsbank (HVB) in Munich. The banks upload electronic export L/C messages to the system that are automatically allocated to designated business units.

Although the Finnish wood cooperative says it has completed phase one of its plans by enabling Metsäliitto Group´s business units and its banks to collaborate on a global electronic L/C data base, vice president of trade finance at Metsä Finance, Kimmo Helle, admits that there is more work to do. "The next step is to standardize the document preparation process leading to a faster and discrepancy free presentation of documents," he says.

According to GTC's CTO, Nick Pachnev, Metsäliitto Group wanted to have complete visibility over all L/C transactions. "The technology had to support transactions where L/Cs are electronically uploaded into the system at Metsäliitto in Finland, invoices and other documents created in 21 locations globally, and documents presented to banks in Europe, the Middle East, and Asia," he explains.

SME solution

Earlier this year, GTC said it had successfully implemented a system designed for small- and medium-sized enterprises (SMEs). Earlier solutions from the Canadian company had been geared towards larger trading groups - the Metsäliitto Group has an annual turnover of Euro 8 billion and has 20,000 employees, while other GTC clients include EADS, Europe's giant aerospace and related services group.

The new SME solution, known as Trade Web, is built on GTC's @GlobalTrade Front End System and has been implemented by HVB. It is designed for processing import L/Cs and guarantees in Germany.

According to GTC, which partnered with HVB to bring to market applications for handling guarantees, L/Cs, and documentary collections that require connections to multiple banks, the technology for SME clients was developed for HVB in just three months after completion of the requirement gathering documentation.

GTC says that its @GlobalTrade application is an important tool in HVB's trade services business strategy. HVB is hosting the platform for its customers and supports the full range of trade services business, as well as agent services for guarantee facilities through this platform. As a web-based, modular interface it can be easily customized, and major investments or changes to the user's IT infrastructure are not required. The Canadian company says its @GlobalTrade systems help buyers, sellers, traders and financial institutions communicate faster and more efficiently while reducing risk and improving monitoring and control. Its customers are business enterprises that need consolidated access to multiple banks and financial institutions that require supply chain finance solutions to meet their clients' needs.

Bolero rolls on

One of the pioneers of online trade finance, Bolero, is continuing to deploy multi-bank solutions and extend agreements with banks that appear keen to continue and expand their use of the open trading platform that aims to enable paperless trading between buyers, sellers, logistics providers, banks, agencies and Customs anywhere in the world.

In August, Bolero announced it had signed a new agreement with Fortis which will enable the banking and insurance services group to provide multibanking trade finance services through the Bolero channel to its global customers. This extends an existing agreement, which allows Fortis to provide live multibanking trade finance services to specific named customers.

The Bolero multi-bank service enables the automation of the end-to-end lifecycle of L/Cs and guarantee instruments for both importers and exporters. According to Bolero, corporates and their banks are increasingly adopting it as the standard channel for multi-bank trade finance. The company also sees both banks and corporates as its customers. It offers an electronic multi-banking channel solution for corporate customers, while at the same time providing a single multicorporate electronic channel for each bank.

"We clearly see the growing demand from customers for multi-bank trade finance solutions," says Eppo Heemstra, Managing Director Commodities at Fortis.

Industry specific, customer friendly

Bolero says its multi-bank solutions are already established in various commodities sectors including metals, agricommodities, oil and petrochemicals, and it is now offering support with enhanced capabilities specific to certain commodities sectors. In May, Bolero announced its commercial availability specifically aimed at oil traders and which includes management of large unstructured oil L/Cs.

Incorporated in this industry-specific solution are a number of additional functional capabilities including support for "red clauses" and large letters of intent.

Bolero's CEO Arthur Vonchek says most of the large oil banks were already providing live Bolero services before the latest release and sees oil traders as a key target market.

The argument that multi-bank solutions are customer friendly was apparently confirmed last year when Citibank forged a partnership under which it will use the Proponix platform by Canada's CGI within its trade finance outsource offering. This marks a major departure for Citibank, which had been offering trade finance outsourcing centred solely on its own platform, but said its interest in Proponix stemmed from its multi-bank capabilities.

Proponix360 includes a corporate trade portal, a back-office trade processing system with sophisticated imaging and workflow, an advanced reporting utility and comprehensive supply chain financing capabilities, including preshipment, receivables, post-shipment and payables financing.

L/C providers and practitioners would do well to be alert to these multi-bank trends, which have the potential to considerably alter the way they do business.

Mark Ford's e-mail is markford@gotadsl.co.uk