The trend towards outsourcing trade services seems to be gathering pace, perhaps even to the extent that a new paradigm in trade financing is emerging where processing of letters of credit (L/Cs) along with most commonly used trade services could possibly be undertaken by just a handful of major players.One of the most serious contenders in the competition to become a trade service provider to other banks and their customers on an outsourced basis is ABN Amro.

Global reconfiguration

For the past three years the Dutch-based bank has been reconfiguring its trade service infrastructure, a process that has included the establishment of an international documentary processing centre in Chennai, India, and the construction of globally integrated technology across the bank's Internet-based service platform, MaxTrad, which is available in over 30 countries.

ABN Amro says it now has 35 outsourcing agreements in place. These include one with Allied Irish Bank, which has close to a 60 per cent market share in Ireland.

Outsourcing agreements

One of ABN Amro's most high profile outsourcing agreements commenced earlier this year when it began handling trade services processing for Barclays.

The initial activities being processed are export L/Cs for UK beneficiaries. More trade services will be phased in over 2004 to include import L/Cs, import and export documentary collections and clean reimbursements.

Strategy

ABN Amro's strategy is based on the premise that as cost pressures intensify, financial institutions will have to redefine the way in which they provide trade services to their customers.

In this context client banks could choose, rather than developing their own trade finance capacity, to leverage the global scale, expertise and investments in trade technology made by ABN Amro, whilst retaining and building on their customer franchise.

The bank says it offers a range of trade partnership and outsourcing solutions, from management of a number of processes to full outsourcing and strategic partnerships.

Competition

Competition to become one of a small band of truly global outsourcers will be tough and ABN Amro is up against some of the world's other major trade financing banks in this pursuit.

Another competitor is Proponix. It was originally a collaborative project between American Management Systems (AMS), ANZ, Bank of Montreal and Barclays but is now wholly owned by AMS.Also looking for outsourcing business are technologically savvy banks such as Bank of New York. It has already agreed to provide trade services processing to a wide range of bank clients, from the Canadian Imperial Bank of Commerce to the Bank of Overseas Chinese.

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