A new company launched in June is to offer online transaction processing to global trade banks, and claims its systems and structures will enable client banks to provide superior customer service at a lower technology cost.

Proponix, an international joint venture between Bank of Montreal, Barclays Bank PLC, Australia and New Zealand Banking Group (ANZ) and trade finance software specialist American Management Systems (AMS), claims to be the first independent company with an outsourcing model and technologies that provide online transaction processing 24 hours a day for trade banks around the world.

According to Bill Graham, President and CEO, Proponix is "the only company to offer end-to-end outsourcing services, not just on high volume items", and he says its services are specifically designed in response to industry demand.

Surevey identifies industry demands

Proponix says it assessed industry demand by commissioning an independent survey that found rapidly changing technology in the global trade arena, and choosing appropriate software and hardware systems, is the primary concern for trade banks -- even ahead of growing revenue and improving profitability.

The survey of 28 major banks from North America, Europe, Asia and Australia, found that respondents believe outsourcing global trade transaction processing could save their banks 20 to 30 per cent, or more, per year and reduce their bank's exposure to investing in the wrong technology. About half of the banks surveyed said they spend more than US$10 million per year processing global transactions.

Technology is the biggest challenge

The study conducted in May 2001 focused on topics ranging from how much banks spend annually on global trade/finance operations to key challenges facing the industry to greatest benefits and barriers of outsourcing their global trade processing.

Key research findings include:

· 34 per cent of respondents said technology is their biggest challenge followed by growing revenue (31 per cent), and improving overall profitability of their operations (27 per cent);

· the three "most urgent" technology projects for global trade which the banks had recently undertaken or had planned 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;

· 62 per cent of respondents said the largest benefit of outsourcing is lowering the price of each transaction;

· 52 per cent of respondents said outsourcing gives the bank access to the appropriate technology

· 36 per cent of US respondents stated the largest outsourcing challenge is building interfaces to legacy (or other) internal systems

An engine for global trade

The result of Proponix's research has been the development of a software application, Object TradeLine(TM). The company claims this will provide the engine for global trade banks that includes the back-office processing of trade finance services to the internet and a front-end trade portal for ease of use.

"Our software system is safe, secure and reliable," says Graham who is keen to stress that banks using Proponix would not lose customers. "Bank clients retain ownership of customer relationships, servicing and credit risk management," he says.

Online L/C transactions and documentary collections

Proponix will 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.

Banks have already expressed an interest in Proponix. Bob Johnson, executive VP and head of global trade at Fleet Boston Financial reckons "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". He predicts that trade banks around the world will be taking a serious look at this alternative over the next 12 months,

Bank benefits

According to a company statement, the benefits of Proponix to client banks include: reduced transaction costs, the replacement of fixed costs with variable costs tied to volumes, improved processing speed and turnaround, reduced exposure to technology selection and ongoing capital expenditure, and improved client functionality, information, and service via internet capabilities.

Formed in August 2000, Proponix is headquartered in Toronto. It will have processing centres in Melbourne, Australia (opening July 2001), Toronto and Asia (opening early 2002) and a data centre in Sterling, Virginia.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.