There are thousands of business-to-business e-marketplace sites operating today, trading everything from bananas to zinc. Of course, many of these will not exist long term, largely because of liquidity. The survivors will be those sites that have strong logistical support and involvement from key players in the industry – whether from producers, traders or financiers.
Leaders have already emerged in certain industries. Enron, for example, is quietly racing ahead in the trading of metals on-line. Another group trading metals, FerrousExchange, has formed a partnership with the e-trading platform Bolero.net to offer secure electronic cross-border transactions for the steel industry. In the world of soft commodities, eGreenCoffee, a B2B exchange, has an alliance with Sucden (UK), a leading commodity and financial futures broker, as well as ABN AMRO to facilitate futures trading on the coffee exchange.
The ironing out of existing logistical challenges will drive the future of e-trade, and important matters relating to standardization of documentation and communication, security and legal requirements on a vast range of issues, such as title to goods, require the utmost attention. There is also the need to incorporate insurance, corporate ratings, inspection services and customs procedures, not to mention the most appropriate financing mechanisms.
Two of the best-known trading platforms, Bolero.net and TradeCard, have worked hard to refine their systems. Bolero.net was created in 1999 as part of a global initiative to move trade onto the Internet. The network incorporates financial institutions represented by the Society for Worldwide Interbank Financial Telecommunication (Swift) and the world’s logistics community represented by the Through Transport (TT) Club. The Bolero system provides secure electronic transmission of business data and documents along the entire trade chain from front-end order processing and management to back-end trade document exchange. Bolero.net is the trading name of Bolero International. Bolero is already working with Latin American producers such as FNC, the Colombian coffee producers association.
TradeCard is a business-to-business e-commerce infrastructure that enables buyers and sellers to conduct and settle international trade transactions securely over the Internet. By aggregating buyers, sellers and disparate trade service providers, TradeCard automates and streamlines existing international trade transaction processes, which are complex, paper-based, time-consuming and expensive. The company says it will be entering the Latin American market later this year.
But these trading platforms seek to provide an efficient and secure communication standard that will facilitate cross-border transactions by converting required paper documents involved in the transaction chain (bills of lading, letters of credit, inspection certificates, among many others) to electronic equivalents within a secure environment.
Many international banks involved in trade are either partners with such trading platforms, or are keeping a close eye on developments, while at the same time preparing to embrace the transition to electronic transactions. This is not an easy process – moving from a back-room paper shuffling system to straight-through electronic processing requires the right products, reorganization and time. A number of the large global banks have made significant progress in this regard, including ABN AMRO, Bank of America, Barclays, BNP Paribas, Citibank, Deutsche Bank, HSBC and Standard Chartered, to name but a few.
Deutsche last year set up a new department as part of its e-commerce initiatives known as eCash Solutions. It is designed to provide a dedicated focus on e-commerce product development for cross-border payments, liquidity management, deposit services, image archive and trade-related products for both the financial institution and non-bank financial institution industry segments. Other banks have made or are making similar moves.
Deutsche’s progress is helping it develop products to enhance e-commerce, cash management and trade for its institutional and corporate clients. The bank has already made significant inroads throughout the Latin American region. Says Paul Simpson, managing director and head of eCash Solutions, at Deutsche Bank in New York: “The way that we approach a product roll-out in the area of trade is similar to many of our major competitors. First, we launch the product globally and then if necessary we make any additional enhancements on a regional basis. Certain countries in Latin America are fairly progressive with respect to electronic applications – particularly so in Brazil, which has offered e-banking for some time now.”
Entering the Value Chain
Simpson also notes that the bank is seeking to leverage opportunities in relation to supply-chain management with its Latin American clients. “Great strides have already been made towards this complete integration, but certain industry efforts haven’t progressed as far as we would have liked,” says Simpson. “Many issues still need to be resolved in order for a true end-to-end electronic transaction to occur.” He also points out that there are major benefits for the region in moving to e-trade practices, pointing to the benefits that large agricultural producers in Argentina, Brazil and Chile could receive by tying the whole supply chain into an electronic network.
Large global banks are also looking to assist the smaller institutions in the transition to electronic platforms. Explains Simpson: “There are additional opportunities for banks that could benefit from outsourcing certain activities. We have received several requests from institutions in Latin America that would like Deutsche Bank to provide e-commerce and outsourcing services.” But this is only the tip of the iceberg, as many other areas of banking are changing with the e-revolution.
Shifts in the banking sector itself are precipitating change, notes Simpson. “The Latin American marketplace has undergone massive consolidation – for instance in Peru, about 70% of the banks are now foreign-owned. Therefore, the influences of these foreign institutions will come into play on the operations of the indigenous banks, and will ultimately accelerate the adoption of e-practices.”
Some of the Latin banks are making considerable progress themselves in a range of e-trade areas. As an example, at the beginning of this year, Banco Itaú, the second-largest, private-sector Brazilian bank, announced that it had joined Bolero.net. This made it the first Brazilian bank enabled to exchange trade data and documents throughout the Internet using the Bolero system. As such, it allows Itaú to assist its customers by helping to reduce costs and accelerate their international trade flows.
According to Alberto Baretto, executive vice president of the international division of Banco Itaú, “This is an unique opportunity for us to broaden our applied e-business strategy, allowing all players to simplify, standardize and secure the paper flow related to international trade operations. Bolero.net is an important step towards cost reduction within the international trade arena and its heavy paper dependable environment. It is a revolutionary system set to become the future of international trade.”
Itaú, which has consolidated total assets of $30.3 billion and was the first Brazilian bank rated Aaa by Moody’s Investors Service, says that its investments in technology and quality assessment in excess of $200 million in the last two years demonstrates a clear commitment to improve products and services by developing information technology infrastructure.
Bolero.net’s commercial director Peter Scott says: “Companies are increasingly considering the efficiency of the trade transaction when they make decisions about where to source goods and supplies. Now that a major Brazilian bank has joined the Bolero.net community, Brazilian companies have the opportunity to be on the competitive edge of the business.”