Clear blue water or common ground?
By Guy Rey-Herme
Guy Rey-Herme, President and COO of TradeCard, Inc and Peter Scott, Commercial Director of bolero.net, address exclusively for e-mmerce the questions that all of us would like answered about the two online trade systems. Which system has a payment function? Are deals being done online securely daily? Will the two systems get together one day?
When were you established and who are your shareholders?
TradeCard: TradeCard was conceived by the World Trade Centers Association in 1994. By 1998, a patent was issued for the business model, and by 1999 TradeCard became an independent company when EM Warburg Pincus made its initial financial investment. At that time, a new management team came aboard and the web-based compliance and settlement model was developed and piloted in 1999. In April of this year, we officially launched the service in parts of Asia and North America.
In addition to Warburg Pincus, some of our primary shareholders include Mitsubishi, Mitsui, Softbank, Marsh, General Electric Information Services, various World Trade Centers and, of course, the employees of TradeCard.
Bolero: We were set up inFebruary 1998. SWIFT and the TT Club own the organisation on a 50/50 basis. SWIFT is the international banking cooperative representing 6,000 banks. The TT Club is the investment vehicle for the world's port authorities and logistics companies. UBS/Warburg Dillon Read have recently been appointed to bring in US$40 million venture capital prior to an IPO expected in the second quarter of 2001. SWIFT and the TT Club will retain a controlling interest.
What are your strategic markets and aims?
Bolero: To provide world industry with the common, electronic B2B platform that allows international trade to be executed online. This includes the provision of infrastructure that supports the exchange of contractual information, the provision of credit and risk services and the initiation and confirmation of payments. The bolero.net solution provides this infrastructure to support competing logistic and financial service providers' solutions.
Given our positioning, our ╬strategic markets' are global, although we have initially focused our efforts on the US, the Far East and Western Europe. Our approach has not been to work with major corporations who have the muscle to drive standards into the transaction chains. We have only engaged with SMEs and micro businesses where they have been identified as customers of major ╬driver companies'. We are currently focused on the B2B sector in providing a solution to the back office settlement and fulfilment requirements especially to industry-backed vertical commodity exchanges.
TradeCard: We are targeting buyers and sellers around the world. Our goal is to make their international trade transactions secure, reliable and cost-effective. As we all know, international trade is anything but that today. It is a complex, paper-based and labour-intensive process that is quite daunting - even for those who are well-practised in it. In addition, it can be quite expensive. By leveraging the facilities of the internet, we have created an e-commerce infrastructure that enables buyers and sellers to initiate, conduct and settle their transactions online. We are an open network available to all trading partners, including banks and business-to-business marketplaces, to facilitate international trade transactions over the internet.
Through TradeCard's web-based workflow engine, we have automated and streamlined existing trade transaction processes through an easy-to-use and easy-to-access solution. It provides a real-time view of the buyer's and seller's transaction and an online payment alternative to the commonly used settlement tools that exist today. Our hope is that we will lower the barriers to participating in international trade and help increase the amount of overall business being done on a global scale.
Who are your partners and how do they facilitate your business model?
TradeCard: We basically have two sets of partner types that make up our whole product - those who facilitate the transactions on our network and those who help market and service members of our network. In the first set, we have a payment guarantee provider, a global payment network alliance and traditional trade service providers for logistics, inspection, cargo insurance and even trade financing. For example, Coface, the leading provider of export credit insurance in the world, provides us with their @rating product, which is the world's first operating cashflow rating service on the web. This service provides sellers with an assurance of payment if all the terms of the transaction are successfully met. This provides peace-of-mind to the seller knowing that they will get paid if they ship the goods that are in compliance to the terms of the purchase order. In the international e-commerce world, we feel that this is a tremendous offering that helps reduce uncertainty while increasing trust.
In addition, we have strategic partners around the world who assist us in sales and customer service. Organisations like Tradelink in Hong Kong and Information Technology Pioneer International, Inc (ITPII) in Taiwan are tied into the trading communities of their countries and provide us with a direct connection to their customer base. We have also begun partnering with banks, such as Comerica Bank, who have deep trade knowledge and extensive customer bases and see the potential value of our offering.
Bolero: Our partner programme encompasses three elements:
a) Our technology partners include Sun Microsystems, Daewoo, MKI, Surecomp, Appian Bridge, CSI Complex Systems, China Systems and GITI Ď with more coming on board every week. These technology partners are developing ╬bolero.net-enabled' products that allow connectivity to the Bolero system.
These partners have a crucial role to play. We believe that it isn't possible to create a ╬one size fits all' application that will meet the needs of say, a ball bearings manufacturer on one hand and a textiles exporter on the other. As a result, we have steered clear of developing any of our own interfaces and document management applications, instead leaving it to approved partners to build and offer competing products that meet specific business needs.
b) Our partner programme also includes consultancy partners such as Cap Gemini and KPMG, that advise corporations on the most effective way to implement and roll out bolero.net.
c) And we have agency partners worldwide. These are bolero.net joint ventures, for example with Mitsui, Hitachi and Sanwa Bank in Japan, that promote the Bolero system in their respective marketplaces. In addition to the Japanese joint venture, we expect to have agency agreements signed in South America, South Korea and Taiwan in the next few months.
How do subscribers sign up and what are the costs to do so?
Bolero: Companies sign up by getting in touch with our sales force via the website (www.bolero.net), at which point a designated sales representative ╬walks' the user through the process. Costs vary from anywhere from several thousand US dollars a year to several hundred thousand US dollars, depending on the size of company, number of users and levels of support. The more advanced membership plans obviously have the potential to deliver far greater benefits to an organisation - in every single case, measured in many millions of dollars.
TradeCard: Signing up is quite easy and affordable. All you have to do is go to our website - www.tradecard.com - and click on the ╬open an account' button. From there, you will be guided through an online application process. We charge a membership fee of US$250 and a per transaction fee of US$150. Again, our aim is to make participating easy and inexpensive.
Do you have a payment function within your system?
TradeCard: Yes. The payment function is one of the core elements of TradeCard. As with all international trade transactions, a buyer wants to receive the goods and a seller wants to be paid. Determining when these two things happen is the tricky part. Through TradeCard's patented compliance engine, the system can automatically match the agreed upon terms of a purchase order against the electronic documents presented at the time of shipment. When compliance is met - meaning that everything matches - it automatically triggers a payment instruction message to Thomas Cook, our global payments network, who then debits the buyer's account and credits the seller's account. This happens entirely online and both buyer and seller are aware of when this occurs. There are no offline mechanisms necessary.
Bolero: The bolero.net solution is not a banking or logistics service provider but an enabling technology layer that competing service providers can use. The bolero.net system accommodates the messaging that advises conditional and unconditional payments between buyers and sellers and provides a mechanism for bank to corporate payment initiation and advice. The bolero.net service allows transactions like ╬open account', ╬collections' and ╬letters of credit' to be brought online. The bolero.net system does not deal with the underlying bank-to-bank payment mechanism and was not designed to do so. This remains the preserve of SWIFT and other international payment mediums.
How are banks involved?
Bolero: First of all the banking community (through SWIFT) co-owns bolero.net with the logistics community (through the TT Club). This is a crucial point that underlines the extent of the global buy-in into bolero.net. The 12,500 members of our two co-owners deal with practically every single organisation around the world involved in cross-border trade as any exporter or importer obviously needs two things - a bank, and someone to get the goods from A to B.
Also, six out of the world's top 10 banks have already signed up to the system. This includes major players such as Citibank, Chase Manhattan, HSBC and ABN Amro.
TradeCard: Banks play several important roles within TradeCard and its members. As mentioned before, banks can provide pre and post-export financing to TradeCard members. Members can access these banking services directly through our network making the financing process much more automated than what exists today.
In addition, banks act as a sales channel for TradeCard as well as providing customer services for their customers who use TradeCard. This relationship gives us immediate leverage and penetration into the international trade marketplace while providing banks with a competitive e-commerce product offering.
Banks have seen TradeCard as a tremendous marketing tool, which combined with their own services, can create tighter relationships with all partners involved in a trade transaction. With such a product, banks can facilitate access for their small to medium-sized clients into the international trade arena. These are customers who have been traditionally under-served in the international marketplace. And for the banks themselves, TradeCard offers an e-commerce solution at virtually zero infrastructure costs. In addition, banks can eliminate operational risks, improve efficiency ratios by reducing processing costs, eliminate trade-related risk assets from their balance sheets, and free up capital previously allocated to trade finance-related activities.
How do you differ from one another (TradeCard v. bolero.net)?
TradeCard: As with many of the international e-commerce initiatives we see appearing, there are many complementary elements. We provide a secure payment solution that relies on delivery of secure data that our patented compliance engine uses for analysis and to trigger payment decisions. Bolero, for example, provides a secure message pipe for documents that support the traditional trade processes. However, we are re-engineering existing processes and targeting the finished goods segment of international trade which represents close to 80% of the volume of international transactions. TradeCard is also designed to allow online transactions for B2B exchanges, which is a key solution for sites migrating to transaction-based models. Bolero indicates that it might be more focused on the commodities space, which includes things such as grains, steel, and oil, for example.
Bolero: We are constantly asked whether we compete with Tradecard. The simple answer is no, but there is a potential conflict with some of our partners. I would just like to expand on this:
Tradecard provides actual logistics and financial services solutions, which as a global e-business infrastructure we do not. We do however provide the global platform on which our partners and customers can build logistics and financial services solutions.
I would also like to clear up one area of confusion and make clear where we do not differ. Some commentators have said that we only deal in commodities and Tradecard deals only in finished goods. This is not so. As a global e-business platform we have members from all areas of industry including, from clothing (Otto Versand) to electronics (Samsung).
Do you plan to work together or should the systems remain separate?
Bolero: There are no current plans to work together with Tradecard, although in principal there are no reasons why we should not do so in the future.
There are however several issues that would need to be resolved. Tradecard operates using a series of message standards that are highly proprietary. The boleroxml open community approach to standards is very different and reflects the industry ownership of the organisation. The bolero.net messaging service validates the quality and content of the boleroxml messages online, very much in the same way that SWIFT does today.
Tradecard messaging would therefore not be accepted by bolero.net unless it adhered to our standards. In addition, bolero.net is evolving its service into the provision of infrastructure that supports competing buyer and seller, risk and credit solutions.
TradeCard: Our focus is on expanding our presence in the global marketplace among buyers and sellers. We are doing this through our technology, our domain knowledge, and by creating many strategic alliances, which serve to benefit TradeCard and its members. This customer focus is what drives us. As with any successful company in the e-commerce space today, you have to always consider possible relationships and what that can mean. Since we have built TradeCard as an open solution, we have a lot of flexibility in creating new partnerships. One could suggest that our offerings could be complementary while each of us might be better fitted to meet the needs of different market segments. TradeCard's mission is to make trade secure, reliable and cost-effective for importers and exporters, and to do this we will remain pragmatic in developing partnerships that will contribute to this goal.
Have you completed any 'live' deals yet?
TradeCard: Yes. We began pilot transactions in October 1999 where actual purchase orders were processed between companies in the US, Hong Kong, Singapore, and Korea. These were real transactions with no parallel processing. In fact, we proved several important value statements of our solution. Until now a buyer and seller had no clear view into their transaction. On TradeCard, all parties can see what documents need to be completed and who is responsible for doing it. This type of centralised data is extremely valuable and has not been available in the traditional settlement models. For example, during one of the transactions, a seller looking for their payment was able to easily access the TradeCard network and view the transaction. On the system, the seller saw that the inspection certificate had not been issued. The seller simply e-mailed the inspection firm and inquired about the delay. Once notified, the inspection firm issued the certificate and the transaction continued. The issue was resolved with just a few clicks and an e-mail message.
In April this year, we officially opened the doors for commercial availability of the solution in the North American and Asian markets and expect to further our global rollout the remainder of this year and well into next year. We continue to make major announcements regarding use of the system. In fact, we recently announced that RadioShack is using TradeCard to initiate and settle transactions with their vendors in Asia.
>We continue to add more members to our network and, now that we have activated the bank channel, we expect to significantly increase the influx of global trading companies and their transactions.
Bolero: Yes, there are live messages going through the system all the time. But due to the emphasis we place on security and confidentiality we are not at liberty to disclose what is ultimately commercial information about our customers.
In addition, our focus at the present time is in getting implementation projects under way rather than dramatically driving up transaction volume. bolero.net is not a point and click B2C-type product but one that is messaging-based and requiring appropriate systems integration and project management. Historical parallels to other industries that have moved towards deeper end-to-end processing through automation infrastructure enhancements suggest that a timeframe of over one year before the hockey stick on transactions shoots up.
Can these be sped up and made less time-consuming?
Bolero: Bearing in mind that some of our customers say that the time taken to process contracts and data through the trade chain can be cut by 65% through bolero.net, I am not sure that 'time consuming' is the right word to use here!
TradeCard: As we grow, we are always looking for ways to streamline our processes. However, by partnering with banks we have a direct link to customers who want international trade solutions. This relationship has already enhanced our acquisition efforts and has given the banks a new tool to offer their customers as well as increase market share. We will be announcing more unique relationships in the near future that will also expand our breadth and put us in front of more businesses seeking better international settlement solutions.