Norwest Finds A Niche in Trade Finance

To see how technology is spurring greater efficiency in the increasingly dog-eat-dog world of Asian trade finance, check out Norwest Corp.'s office on the Kowloon side of Hongkong.

There, 63 Norwest representatives process letters of credit and trade- related paperwork for U.S. businesses. Those customers can access the Hongkong office directly with special software that allows anyone with a phone and a modem to bypass the bank's Minneapolis headquarters.

The software, made by Complex Systems Inc., is similar to a variety of trade finance programs found in the trade finance departments of U.S. banks. Norwest installs it straight into customers' computers, enabling them to slash about a week off the typical wait for approval.

"It can take up to 15 days for a letter of credit to be processed," says Dharani Narayana, Norwest's executive vice president for world banking. "But we can cut at least nine or 10 days off that time, and usually get it done in 48 hours.

"It's almost like banking from home, only at your office."

Once a relationship-driven business dominated by big money-center banks, trade finance in fast-paced Asia is now viewed by many customers as simply another commodity, where price and speed are crucial considerations.

Since the early-1980s, dozens of U.S. banks have entered the booming Asian letter of credit business, fueling an intense competition.

Their entry has been made easier by the handful of technology firms - including Complex Systems, Kapiti Inc., and American Management Systems - that now make specialized trade finance software.

U.S. banks face steep competition from Asian banks, who - by virtue of their smaller, trade-dependent markets - are often more sophisticated in their use of technology to facilitate trade.

"American banks are still behind the curve," says Jack Eisner, senior vice president of Complex Systems, which has sold trade finance software packages to 32 Asian banks and 42 U.S. banks. "They got a little spoiled, and thought they could dictate to the market."

As a result, Asian customers often have higher expectations than their U.S. counterparts.

Asian companies view a transaction in its entirety, and "don't just want an inexpensive service, they want it tailored to their business," says Mr. Eisner.

Software packages also must meet the demands of local markets. Most central banks in the region have specialized reporting requirements, for instance, which must be incorporated into the products used in each country. Flexibility is key, but such specialization could lead to problems.

The software systems on the market often have trouble interfacing - a big problem at a time when syndicated letters of credit are viewed as the wave of the future.

"It is very important that those systems be able to interface," Mr. Narayana says.

Norwest, which opened its Hong Kong office in 1983, uses software made by several different companies, as well as some in-house products. It processes letters of credit and other trade documents for the mixture of more than 40 U.S. importers and exporters that now use its software.

But Mr. Narayana is the first to admit that nothing is sacred or proprietary in the growing world of trade finance technology. Even the latest in systems or software are usually duplicated within six months, making any edge gained from new technology fleeting, at best.

"Our objective is to simplify the process," he said. "If you remove the hassles of exporting and add value, you'll get big rewards coming to you."

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