Technology is the key to success in funds transfers, Bank of New York believes, and the idea seems to work: Its transfer business has grown 15% a year since '92.

Talk about passing the buck. Bank of New York does it to the tune of more than $200 billion a day.

And given the way the bank,s funds-transfer business is developing, even more will go through the bank's downtown Manhattan computers in the years ahead.

The business has been "growing at over 15% a year annually for the last two years," says Donald R. Monks, Bank of New York's executive vice president for funds transfer and correspondent banking. "We expect that to continue."

According to Mr. Monks, Bank of New York handles around 45,000 transactions a day, or 5% of the total funds transfers moving through New York City.

Behind this rapid growth, which Bank of New York estimates is more than twice the overall market increase, lies technology. "The key is computerization and end-to-end service," Mr. Monks says.

For the last several years, Bank of New York has been heavily investing in the technology and staff it needs to provide worldwide funds transfers 22 hours a day.

This investment has permitted the bank to overcome time differences and offer same-day funds transfers to customers wherever they are.

If a Dutch importer, for example, wants to transfer funds to a Taiwanese exporter, Bank of New York can handle it as fast, if not faster, than a local bank in either the Netherlands or Taiwan.

Bank of New York plunged ahead of the rest of the market in funds transfer for several reasons. First, the bank built up one of the largest networks of correspondent banks around the world, totaling more than 2,200 at recent count. It continues to add to this burgeoning network.

Executives from the bank conduct continuing seminars in Eastern Europe and in countries like Vietnam, Turkey, and Egypt to help foreign institutions understand what international funds transfers are all about.

The seminars serve as prime recruiting ground for Bank of New York's growing roster of foreign correspondents.

Secondly, the bank stuck to funds transfers while other big U.S. banks shifted away from this kind of traditional commercial banking activity into capital markets and trading.

"Some of the large U.S. banks lost their focus or redirected their interests to other activities," Mr. Monks observes.

Thirdly, most international trade is denominated in U.S. dollars. This gives Bank of New York an inherent advantage over foreign competitors when it comes to funds transfers.

"Oddly enough, if a Korean company ships goods to Japan, the transaction will most likely be denominated in dollars rather than in yen," the banker observes. "And if you want to move dollars internationally, New York City is the place to do it, since most dollars never leave the United States; they just move from one account to another."

Fourth, Mr. Monks emphasizes, the bank alms to be an "international" bank, rather than a "global" bank. The distinction is not academic. An international bank, he explains, offers internationally related services like funds transfers, but does not aim to become involved in banking or capital markets activity in other countries.

Correspondent banks can, therefore, feel more comfortable with Bank of New York because they have the security that the bank will not try to grab away their local customers.

Global banks, he says, cannot offer the same security, because they are actively developing their own local business relationships around the world.

"We don't have too many branches outside the United States," Mr. Monks stresses. "We have correspondents who don't have to worry that we might want to go after their own customers."

Driving the huge volumes in international funds transfers is trade finance. Mr. Monks estimates that trade finance accounts for as much as 80% of all funds transferred internationally. The balance comes from foreign exchange trades and other movements of funds.

"Our strategy is to focus on the settlement of commercial payments that support the movement of trade and services," says Mr. Monks.

That, he adds, means supplying a "seamless," computerized service that avoids errors or the need to answer inquiries.

To provide seamless service, Bank of New York supplies retail or other importers with a standardized software package known as Cash Register that can chum out and transmit, within 36 hours, a letter of credit, or a bank guarantee that it will pay for an import.

"The one thing retailers don't want is you retyping information they supply for a letter of credit and then making an error," Mr. Monk points out. "What they want is a system that avoids errors and questions."

The bank also does not balk at providing a letter of credit for even a small transaction, something other large U.S. banks are increasingly reluctant to do.

The reason: scale counts. The larger the number of transactions the bank handles, the more money it makes to cover its investment.

"Scale is important because it spreads the investment over a larger volume," says Mr. Monks. "And we get paid on a widget basis, or per unit of transaction."

Only a few banks these days are willing or capable of keeping up with the cost of investing and updating the technology needed to remain competitive.

This alone, Mr. Monks adds, means there will likely be fewer competitors around in the future. - "We have the feeling that some of the large banks are giving up on the business," he says.

Foreign banks with branches in New York, too, are increasingly in a dilemma. Either they invest large amounts to provide state-of-the-art funds transfers or find someone else to supply the service.

Much of Bank of New York's growth in recent years, Mr. Monks says, has come from taking business away from banks that could no longer keep pace with the necessary investments in technology.

Around half the international funds transfers, he estimates, are handled by six or seven large U.S. banks. The rest are handled by some 120 foreign banks with offices in New York City.

"Many foreign institutions will use their own branch in New York City for clearing," Mr. Monk says.

"But if they don't have a sophisticated computer system, the service isn't up to par, so some of the bigger global banks are beginning to de-emphasize funds transfers because they have not been able to sustain the investment in technology."

That means more business for Bank of New York. Still, getting it isn't all that easy.

Although the bank now does domestic check processing for three big foreign banks, most U.S. banks and foreign banks with offices here remain reluctant to subcontract their clearing business out for fear of losing their customers.

Foreign bank executives, too, are also unwilling to go back to the head office and admit that service is not at the level it should be.

"Progress has been slow, Mr. Monks admits.

"Outsourcing is a good idea, but it's been slow to come out."

Funds Transfer Leadership

Why Bank of N.Y. does so well

* It boasts one of the largest networks of correspondent banks - more than 2,200 around the world.

* It has consistently stayed with the business while other big U.S. banks got involved in capital markets and trading.

* It has an edge over foreign competitors because most international trade is denominated in U.S. dollars.

* It doesn't threaten to steal business from its customers, because it isn't involved in banking and capital markets activities in other countries.

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