One of the pioneers of letter of credit (L/C) processing services is predicting a significant growth in the volume of trade services outsourced by banks.

Wachovia Bank, which has been a third party provider of back office trade processing services for more than a decade, says it believes the market for trade outsourcing services will double over the next three years.

Independent study

Wachovia's prediction is based on its own analysis of the market and a trade outsourcing study performed independently by the German consultancy firm Roland Berger according to a recent report.

It says that in 2003 Wachovia handled over 34,000 import L/Cs worth more than US$3 billion and processed 67,000 import L/C related negotiations and drawings outsourced to it. In addition, the bank processed more than 9,300 export L/Cs on an in-sourced basis.

Pioneering L/C processing

Wachovia claims to be the largest processor of outsourced L/Cs in the world, having processed more than 350,000 letter of credit transactions within Asia alone.

It also claims to be the first bank in the world to allow its customers to initiate L/Cs by accessing a Wachovia web site.

Competition

Another bank that now counts in-sourcing trade finance processing as a core business activity is Bank of New York (BoNY). It uses its global branch network and correspondent bank relationships to offer comprehensive L/C services to importers, exporters, and correspondent banks.

BoNY says that 71 per cent of its business now derives from processing work and it now perceives itself as a major in-sourcing partner to corporations, financial institutions and fund managers according to the bank's managing director of global trade financial services, Howard Bascom.

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