Bank of Montreal Offers Cross-Border Data Link

More U.S. and Canadian banks are offering a new form of cash management service to companies on both sides of the Canadian border.

In the latest such development, Bank of Montreal and its U.S. subsidiary, Harris Bancorp of Chicago, said last week that they have begun providing the service to U.S. and Canadian companies.

Electronic data interchange, or EDI, allows corporations to send payments and invoices electronically to trading partners through their banks.

Bank of Montreal and Harris are transmitting payments from a U.S.-based automobile manufacturer, which both banks refused to name, to two of the company's Canadian suppliers, Guelph Tool and Die Ltd. and S&H Fabricating Canada Inc.

Existing Accounts Used

The Bank of Montreal service has some special qualities. The Canadian bank and its U.S. subsidiary are offering a fully automated payment process in which Canadian customers do not need to maintain a U.S. dollar account in a U.S. bank. They can transfer payments to U.S. companies using the same U.S. dollar accounts that many already maintain in a Canadian bank.

"Most Canadian companies say they don't want a |mirror' account" in the United States, said Larry Westover, senior product manager for Bank of Montreal. "Now they don't need another one."

Other banks may soon make similar announcements. NBD Corp. and Toronto Dominion Bank are performing cross-border payments for several customers, but NBD declined to name the customers or to specify the arrangements.

Royal Bank of Canada and PNC Financial Corp. are transferring payments for General Motors and its Canadian subsidiary. Chase Manhattan Bank and Bank of Nova Scotia have announced an alliance to perform cross-border payments.

Volume Still Small

While EDI has been touted as the wave of the future for the past 10 years, volume in these arrangements is still tiny compared with the total volume of paper-based corporate trade payments.

"It's surprising there's very little volume. It's not substantial at this point, but that kind of [cross-border] alliance should be a large-volume deal," said Mindy S. Ross, a vice president at Chase Manhattan Bank.

Canadian banks have been offering EDI cash management services only since last year, when the seven largest banks - including Royal Bank, Toronto, Dominion, and Bank of Montreal - formed an alliance to clear and settle EDI payments among themselves. These seven banks process 91% of the total trade payments made in Canada, said Larry Westover, senior product manager for Bank of Montreal.

General Motors Canada was the first company to begin using the Canadian banks' EDI services. Only 8% to 9% of Canadian companies use EDI, Mr. Westover said.

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