Comerica Inc. expects to boost its share of trade finance by becoming the first banking institution to offer an Internet payments and settlement service for international trade from New York-based Tradecard Inc.
The $40 billion-asset bank said on Monday that it would begin offering the co-branded service next week. The goal is to facilitate trade between buyers and suppliers of large, international shipments of goods. Financial terms of the relationship were not disclosed.
With more of its corporate customers engaging in cross-border trading, Comerica faced an increasing need to make such services available, said Douglas Ransdell, senior vice president of international banking at the Detroit-based banking company. Ninety percent of Comerica's balance sheet is devoted to corporate lending, and it ranks as the country's 12th-largest commercial lender.
"We think this is an opportunity for us to gain market share in the trade transaction business," Mr. Ransdell said.
Services such as Tradecard's are aimed at slashing the costs of paper-intensive activities such as issuing letters of credit, which guarantee that suppliers will receive payments for shipped goods and that buyers will get the goods they purchased. Tradecard officials say their service can perform many of the functions that letters of credit do, but at a tenth of the cost.
Comerica customers that buy goods overseas will be able to use Tradecard's patented network technology to track shipments of goods, compare delivered items against purchase orders, and originate payments. Buyers and suppliers can initiate, negotiate, fulfill, and settle international trade transactions online, 24 hours a day, bank officials said.
"The (Tradecard) concept saves a lot of cost to users and takes an awful lot of the cost out for providers such as ourselves," Mr. Ransdell said.
The push to automate international trade on the Internet is gaining momentum. Bolero.net, a similar online trade service, last week signed on Chase Manhattan Corp. as a member, adding to a lineup that includes ABN Amro Holding NV, Citigroup, and HSBC Holdings PLC.
While both Bolero and Tradecard can be used as alternatives to paper-intensive trade deals, they target different markets. Bolero is more suitable for bulk shipments of commodity items, such as oil or pork bellies, in which ownership might be transferred many times before ultimate delivery. Tradecard is more focused on automating trade of finished goods, such as parts for manufacturing.
Tradecard did not say how many buyers and suppliers had joined its network, but said it has processed nearly $10 million of trade transactions since its network began operating a few weeks ago. It charges its members a $250 annual fee and $150 per transaction for deals valued between $10,000 and $100,000.
Tradecard's service has mistakenly been viewed as a competitive threat to the banking industry's letter of credit business, said Kurt Cavano, Tradecard's chief executive officer. In fact, he said, banks represent his "best distribution channel."
"What is really important about this is that it's the first of several [bank] agreements that will be coming out in the next several months," Mr. Cavano said. "We could be perceived as competitive with banks but the reality is that we are an alternate channel that banks can choose to offer their customers."
Larry Clopp, a research director at Stamford, Conn.-based GartnerGroup Inc., said Comerica's deal with Tradecard shows that banks increasingly are searching for ways to eliminate paper.
Letters of credit can take days to set up and can cost as much as 4% of the value of the goods shipped, he said.