> Subject: > International Trade Instruments Inch Toward Paperless Mecca > Date: > Mon, 12 Mar 2001 07:46:34 -0500 > From: > "R. A. Hettinga" <[EMAIL PROTECTED]> > To: > Digital Bearer Settlement List <[EMAIL PROTECTED]> > > > --- begin forwarded text > > > From: Somebody > To: "R. A. Hettinga" <[EMAIL PROTECTED]> > Subject: International Trade Instruments Inch Toward Paperless Mecca > Date: Mon, 12 Mar 2001 09:31:26 -0000 > > http://www.electronicbanker.com/btn/articles/btnmar01-6.shtml > > International Trade Instruments Inch Toward Paperless Mecca > > By Patricia A. Murphy > Electronic payments may be the hottest topic in e-commerce circles > today --at last count there were over 200 private and public companies in > the U.S. market offering technologies and/or services that support > e-payments over the Internet. But if recent events are any indication, trade > finance may be the next area of B-to-B commerce that is pushed into the > world of electronic exchanges. > > Not that it will be an easy process. Experts say it could prove more > difficult than the transition from checks to electronic payments. "It's an > enormously complicated process," says Dave Medeiros, director of the global > payments practice at TowerGroup, Needham, MA. "There are so many different > agents that have to be networked." > > Among the parties to an international sale of goods are: importers and > exporters, banks, customs agents representing various governments, freight > and forwarding agents, shippers, and others. Brokering standards and > navigating the legal systems of all these parties makes it almost an > agonizing process to migrate trade finance from paper to the Web, says > Medeiros. > > But that hasn't kept some bankers and technology providers from trying. And > late last year, Bolero, a B-to-B marketplace provider that is part owned by > SWIFT, the international financial messaging network, scored a coup of sorts > when it secured $50 million in funding from venture capitalists. This at a > time when the technology stock heavy Nasdaq was in a tailspin and dotcoms > from every corner of the Web were closing down because funding was drying > up. Bolero executives say the money should be enough to keep the network on > course for profitability in 2002. > > In January, Bolero took another big step when it hired a standards czar. > Peter Guldentops, who was chief standards writer at SWIFT, is now in charge > of what Bolero calls the "bolero XML standards initiative." While at SWIFT, > Guldentops is credited with helping to develop over 200 message standards > > XML has emerged as the standardized data language for transferring financial > documents across the Internet. Bolero's XML initiative, launched last April, > has generated electronic standards covering more than 65 documents commonly > used in world trade already, ranging from advance shipment notices and > import declarations to trade confirmations, a spokesman says. Noticeably > absent from the list are standards related to payments and associated > financial instruments, like letters of credit. The Bolero spokesman, > however, suggests these may be addressed by a new group of standards that > could be issued as early as next month. > > Bolero counts as participants seven of the world's top 10 banks, five of the > top 10 container shipping carriers, numerous online exchanges, and scores of > major multinational corporations, including Samsung and Hitachi. In remarks > to bankers last fall, during SWIFT SIBOS, participants claimed to be > slashing upwards of three weeks off trade processes that normally take up to > a month. But it's the connection Bolero has with SWIFT that truly > establishes its credibility. > > "Bolero is able to distinguish itself because it has SWIFT behind it, and it > has all the robustness of SWIFT's technology and its approach to financial > standardization," says Susan Skerritt, head of the global corporate practice > at Treasury Strategies Inc., Chicago. > > Skerritt sees efforts like Bolero, and TradeCard, which uses the corporate > credit card model to support international trade, running parallel to > efforts to promote Internet-based payments. > > As these gain notoriety, new efforts are underway to automate some of the > more arduous financial tasks in international trade, like securing letters > of credit (L/Cs). "This is a hugely paper-intensive process," says Mike > Moretti, co-founder of LCconnect, New York. LCconnect is an electronic > marketplace that brings together corporate borrowers and banks that are > willing to lend those borrowers money using anticipated trade shipments as > collateral--the parties to an L/C. > > Just working out the details of L/C can take days, experts note; the > execution process, with about 10 different steps, can take weeks of document > exchanges. LCconnect moves the initial steps to the Internet. "It can take a > process that normally takes hours and complete it in minutes," Moretti > claims. > > Moretti identifies the market for LCconnect as banks and corporate credit > officers looking for banks to finance their trade deals. Five companies, all > of them Fortune 500 companies, Moretti says, and six banks (four American > and two European) were expected to complete a three-month test of the > concept last month. If everything goes according to plan, the L/C > marketplace could be in full swing within a month or two. > > Corporate treasury executives are clamoring for L/C automation tools, > according the Association for Financial Professionals (AFP). A member survey > released last fall by the Bethesda, MD-based group (formerly, the Treasury > Management Association), found 80% would prefer to execute L/Cs online. > > The AFP survey also suggests Internet access to L/C monies would make the > process more competitive. Asked how many banks typically are asked to bid on > L/Cs, more than half (58%) of financial officers polled by AFP said just > one. Nearly 70%, however, said they'd prefer quotes from multiple banks. > > The draw for banks, says Moretti, is a larger pool of potential L/C clients, > and the luxury of being able to pick and choose which deals to bid on, > anonymously. They can even change bids in response to pricing offered by a > competitor, notes Moretti. > > Banks can also improve portfolio management with a service like LCconnect, > says Moretti. That's because in addition to automating the L/C bid process, > the LCconnect marketplace can be used by banks to buy and sell L/Cs. "The > L/C business has always been a reactive business. There's never been a > proactive way for banks to get L/Cs off their balance sheets," insists > Moretti. "We offer a search capability for banks so they can bid on the L/Cs > that best meet their criteria." > > Skerritt sees merit in automating the L/C process. But she cautions that it > may never become a major push in the e-commerce arena. Data gathered by her > firm suggests that letters of credit could be on the wane. In retailing, for > example, Skerritt says some companies have reduced use of L/Cs by as much as > 70%. > > Skerritt believes the decline may have occurred in part because many of > these companies have been trading partners for years, and L/Cs are most used > by trading partners that are new to one and other. "Because retailers have > been dealing with the same suppliers for years, it may be more a matter of > trust" that's prompting this change, Skerritt says. > > Skerritt also suggests trust, and the trust models that have emerged around > e-commerce, could eventually obviate the need for trade finance instruments > like the L/C. "Is the letter of credit going to be the method of the future, > or are there other ways available for ensuring trust on the Internet?" > > While Skerritt and others ponder this question, however, initiatives like > Bolero, TradeCard and LCconnect will only continue to gain converts, as the > push to "electronify" commerce continues. > > --- end forwarded text > > > -- > ----------------- > R. A. Hettinga <mailto: [EMAIL PROTECTED]> > The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> > 44 Farquhar Street, Boston, MA 02131 USA > "... however it may deserve respect for its usefulness and antiquity, > [predicting the end of the world] has not been found agreeable to > experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' > -- http://www.constructiongigs.com/ Use gold as money. It's easy. 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