A flurry of alliances and new platforms is about to jump-start the nascent field of electronic cross-border payments.
Until recently, only the first pieces of a trade could be performed online – exploration, negotiation and the actual placement of an order. “But you still have to automate financing, fulfillment and payment,” said Avivah Litan, an analyst at the Stamford, Connecticut-based Gartner Group Inc.
Not for long.
Companies and industry groups are about to tackle all three of these issues, with New York’s TradeCard Inc. going after online transaction settlements for importers and exporters.
It’s a major opportunity, since Litan expects global e-commerce to be a US$7.3 trillion market by 2003. By next year, at least 20 companies are expected to offer end-to-end applications for cross-border electronic purchasing and payments, said Litan.
Recently, Detroit-based Comerica Inc. became the first U.S. bank to sign an agreement with TradeCard. Under the deal, Comerica will market TradeCard products and provide support to its customers.
TRADE GETS A MAKEOVER
The traditional way of moving money around for international trades involves letters of credit or direct payments, either on delivery or some later date.
That process can be slow, expensive and risky, said Mike Rinkus, Comerica’s first vice-president of international trade service. With TradeCard, importers should expect to see a 60 to 70 per cent cost savings over traditional payment mechanisms, he said.
Rinkus said a number of middlemen are eliminated by a TradeCard financial transaction, leading to estimated time savings of 30 per cent or more.
Banks in Hong Kong and Taiwan have also signed up to use TradeCard, as has New York-based electronics chain RadioShack Corp. – which became the first U.S. company to complete a series of international transactions using the TradeCard system.
While TradeCard streamlines and automates the existing payment process, companies like the London-based Orbian Management Ltd. offer a whole new way of looking at money. What Orbian offers is a lot like an electronic IOU – the buyer of a product sends an electronic certificate to a seller, which can then redeem it at a discount, redeem it at its maturity, or use it to buy products from its own suppliers.
Orbian’s product is attractive because the company doesn’t actually lend money but does guarantee the ability of other businesses to pay for goods or services. Also, the cost for an Orbian credit is equal to an annual rate of .5 per cent interest.
Orbian, which is signing up early adopters, plans to go live in September.
