Bank of Montreal, Barclays Bank, Australia and New Zealand Bank (ANZ) and American Management Systems have launched Proponix, a joint venture company offering outsourced trade finance services to banks worldwide.
Proponix has developed a proprietary software application, Object TradeLine, to provide front-to-back-office processing of trade transactions. The service covers online transaction processing for letters of credit guarantees, bankers' acceptance, documentary collections and reimbursements. At the front end, proponix is providing an Internet-based trade portal, through which banks and their customers will be able to initiate and track their trade transactions online.
"Our software system is safe, secure and reliable. It is also transparent, allowing bank clients to retain ownership of customer relationships, servicing and credit risk management. Object TradeLine is the next generation of software and banks can access this technology through Proponix while staying well within the IT spending budget," says Bill Graham, Proponix president and CEO.
The Proponix partners are promising to reduce costs per transaction, replace fixed cost with variable costs tied to volumes, improve processing speed and turnaround, reduce exposure to technology selection and ongoing capital expenditure, and improve client functionality, information, and service via Internet capabilities.
"In outsourcing our processing services to Proponix, we will be able to maintain our competitive position in the market while sharing an improved, lower cost processing platform," says Peter Wren, managing director, trade finance, Bank of Montreal.
Other banks are watching the development with interest. "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," says Bob Johnson, executive vice president, head of global trade, FleetBoston Financial. "Many trade banks around the world will be taking a serious look at this alternative over the next 12 months."
Headquartered in Toronto, Canada, Proponix will have processing centres in Toronto and Melbourne, Australia, with other key operations in Hong Kong and Sterling, Virginia.
In signalling its launch, Proponix released details of a recent survey of 28 major banks from North America, Europe, Asia and Australia, which found that respondents believe outsourcing global trade transaction processing could save their banks 20 to 30 per cent, or more, per year and reduce exposure to investing in the wrong technology. About half of the banks surveyed say they spend more than US$10 million per year processing global transactions.
Key findings from the research include:
* according to 34 per cent of respondents, 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 have done recently, or plan to do soon, are: building Internet front-end capabilities; installing new or updating back office software; updating legacy computer systems to meet customer demands;
* the largest benefit of outsourcing is lowering the price of each transaction, according to 62 per cent of respondents;
* more than half (52 per cent) believe outsourcing gives the bank access to the appropriate technology, and;
* 36% of US respondents state the largest outsourcing challenge is building interfaces to legacy (or other) internal systems