ABA Banking Journal - December 2006 - (Page 50) Tech Dec 06 11/28/06 1:32 PM Page 50 Tech topics case in point Giving international open finance the clarity of a letter of credit had yet to be worked out before, as Gil Scot Heron might say, this revolution As anyone who knows international trade can tell you, financial transactions surround- could be televised. ing the supply chain management process have not kept pace with the enterprise resource planning revolution. Slow and steady, mired in paper, and anything but transparent, pay- How much do they need to know? ments are the gawky back-end of an otherwise elegant process. Not all business executives understand Gradually, payments are being pulled forward, 21st Century style. One leader in the these sorts of nuances and, in the tech field is Bank of America, which takes its role as innovator in trade financing seriously community, there is a raucous debate and is trying to render the process fully electronic, and payment far quicker than 30-, going on about how much business peo- 60-, or 90-days under classic open-finance terms. All this, while helping small suppliers ple need to know. Yet because services move beyond the letter of credit, which can be expensive to use, notes Daniel Scanlan, have the potential to distribute business senior vice-president, global product manager. logic differently, the tools, techniques, Initially, we rolled out a Purchase Order to Pay program, Scanlan recalls. The idea and potential drawbacks probably should was to supplement the letter of credit with simpler open-term financing that occurs for be understood on some basis. To get pro- business-to-business deals in the U.S. jects developed properly, Heffner thinks Typically, this program works in a scenario where mammoth retailers are purchasing business executives ought to be in the dri- merchandise overseas from huge pools of small ver's seat. companies that need a financial instrument The idea Right now, quite frankly, the busi- along with a firm order to get the deal flow ness people have to be in the position to started. The tool in question can be electronic, was to champion these initiatives because IT still but it needs to provide the letter of credit's guar- doesn't have the clout it once did, says supplement the antees and understanding cultivated by a rich Adamcyzk. While we are finally at a history of use. letter of credit place where innovation is being empha- It's fine to innovate and take the paper out sized, banks need clear project defini- of the process, notes Scanlan of the transition with simpler tion. away from the LofC. But these small businesses Lance Hill, vice-president product and have found that, on their end, they had been get- open-term solution marketing, WebMethods, ting a lower advance rates [without an LofC] from Fairfax, Va., says of the dozens of projects financing that their banks, because the payment flow of open he's aware of personally: Some banks are terms had been less trusted. Basically, programs occurs for very open about use of services maybe like Purchase Order to Pay are trying to squeeze they are wrapping services around legacy out extra cost as well as remove the burden of business-to- code for example, Hill explains. delayed payment and bridge loans. They also turn These SOA enthusiasts tend to edu- traditionally adversarial relationships into more business deals cate business execs, and are generating cooperative ventures and actually reward those in the U.S. buzz and support from the top down who cooperate with better terms. Overall, notes with formal committees and a lot of SOA Scanlan, what we're trying to facilitate is discussion, he adds. faster yet trusted payments for small firms. Others, notes Hill, have decided that Enter Atlanta-based PrimeRevenue, a supply-chain finance firm that has supplied the their executives are better served by low technology behind another program BofA issued that is related to Purchase Order to key, tech-driven, adaptive strategy that Pay. leaves business people only with results. This program, simply known as payables financing, involves the buyer to put its However a given bank goes about man- own balance sheet on the line, by, in essence, offering a future-value-dated payment, aging their learning curve and political according to Scanlan. With the PrimeRevenue system, the buyer submits data on issues, they should adopt projects that approved invoices, without any changes to existing invoicing or approval processes. The drive out cost and drive up revenue, says supplier views the receivables data. It has the option to exchange receivables before consultant Judith Hurwitz, founder and maturity date for early payment. The funder receives and reviews early payment president of Hurwitz Associates, requests. The funder provides funding to the supplier and PrimeRevenue sends banking Burlingame, Calif., and author of the instructions against buyer's clearing account at maturity of invoice, paying the supplier recently published, SOA for Dummies. or funder, if the invoice was discounted. This closed loop system makes open finance Only then should businesses take on work like a letter of credit only better. See ABABJ, November p.55 Everybody gains the more esoteric infrastructural aims of when quicker payment is facilitated, says Scanlan, of the program. A large part of service reuse and code perfection and Bank of America's trade services architecture used to be mainframe based with a web- lifecycle management around creating, based client access system co-developed with S1 Corp called Trade Services on Direct. connecting, managing, and upgrading ser- Now, the giant is extending its technology further to synchronize physical and financial vices. BJ supply chains. BJ 50 DECEMBER 2006/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.webmethods.com http://www.primerevenue.com http://www.hurwitz.com http://www.amazon.com/gp/product/0470054352?ie=UTF8&tag=ababankingjou-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0470054352 http://www.ababj.com/subscribe.html Table of Contents for the Digital Edition of ABA Banking Journal - December 2006 Contents Editor's Column The Secret to Success. Can you Guess It? Snapshot: M&A Outlook Poolside With the Godfather Sleight of Mind Banking From on High-The Regulators' Views ABA Chairman's Position ABA Resources The Phoenix Bank of Hallam, Neb. How Banks Are Handling Multi-Factor Authentication COVER REPORT: Got Innovation? M&A WORKSHOP: What Should You Expect From a Merger Advisor? SOA (begins to make) Inroads Paper, Plastic, or Point-of-Sale Checks? Compliance Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy ABA Banking Journal - December 2006 ABA Banking Journal - December 2006 - (Page Cover1) ABA Banking Journal - December 2006 - (Page Cover2) ABA Banking Journal - December 2006 - (Page 1) ABA Banking Journal - December 2006 - (Page 2) ABA Banking Journal - December 2006 - Contents (Page 3) ABA Banking Journal - December 2006 - Editor's Column (Page 4) ABA Banking Journal - December 2006 - Editor's Column (Page 5) ABA Banking Journal - December 2006 - Editor's Column (Page 6) ABA Banking Journal - December 2006 - The Secret to Success. Can you Guess It? (Page 7) ABA Banking Journal - December 2006 - Snapshot: M&A Outlook (Page 8) ABA Banking Journal - December 2006 - Snapshot: M&A Outlook (Page 9) ABA Banking Journal - December 2006 - Snapshot: M&A Outlook (Page 10) ABA Banking Journal - December 2006 - Snapshot: M&A Outlook (Page 11) ABA Banking Journal - December 2006 - Snapshot: M&A Outlook (Page 12) ABA Banking Journal - December 2006 - Snapshot: M&A Outlook (Page 13) ABA Banking Journal - December 2006 - Poolside With the Godfather (Page 14) ABA Banking Journal - December 2006 - Poolside With the Godfather (Page 15) ABA Banking Journal - December 2006 - Sleight of Mind (Page 16) ABA Banking Journal - December 2006 - Banking From on High-The Regulators' Views (Page 17) ABA Banking Journal - December 2006 - Banking From on High-The Regulators' Views (Page 18) ABA Banking Journal - December 2006 - Banking From on High-The Regulators' Views (Page 19) ABA Banking Journal - December 2006 - Banking From on High-The Regulators' Views (Page 20) ABA Banking Journal - December 2006 - ABA Resources (Page 21) ABA Banking Journal - December 2006 - ABA Resources (Page 22) ABA Banking Journal - December 2006 - ABA Resources (Page 23) ABA Banking Journal - December 2006 - The Phoenix Bank of Hallam, Neb. (Page 24) ABA Banking Journal - December 2006 - The Phoenix Bank of Hallam, Neb. (Page 25) ABA Banking Journal - December 2006 - How Banks Are Handling Multi-Factor Authentication (Page 26) ABA Banking Journal - December 2006 - How Banks Are Handling Multi-Factor Authentication (Page 27) ABA Banking Journal - December 2006 - How Banks Are Handling Multi-Factor Authentication (Page 28) ABA Banking Journal - December 2006 - How Banks Are Handling Multi-Factor Authentication (Page 29) ABA Banking Journal - December 2006 - How Banks Are Handling Multi-Factor Authentication (Page 30) ABA Banking Journal - December 2006 - How Banks Are Handling Multi-Factor Authentication (Page 31) ABA Banking Journal - December 2006 - How Banks Are Handling Multi-Factor Authentication (Page 32) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 33) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 34) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 35) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 36) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 37) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 38) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 39) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 40) ABA Banking Journal - December 2006 - COVER REPORT: Got Innovation? (Page 41) ABA Banking Journal - December 2006 - M&A WORKSHOP: What Should You Expect From a Merger Advisor? (Page 42) ABA Banking Journal - December 2006 - M&A WORKSHOP: What Should You Expect From a Merger Advisor? (Page 43) ABA Banking Journal - December 2006 - M&A WORKSHOP: What Should You Expect From a Merger Advisor? (Page 44) ABA Banking Journal - December 2006 - M&A WORKSHOP: What Should You Expect From a Merger Advisor? (Page 45) ABA Banking Journal - December 2006 - M&A WORKSHOP: What Should You Expect From a Merger Advisor? (Page 46) ABA Banking Journal - December 2006 - M&A WORKSHOP: What Should You Expect From a Merger Advisor? (Page 47) ABA Banking Journal - December 2006 - SOA (begins to make) Inroads (Page 48) ABA Banking Journal - December 2006 - SOA (begins to make) Inroads (Page 49) ABA Banking Journal - December 2006 - SOA (begins to make) Inroads (Page 50) ABA Banking Journal - December 2006 - Paper, Plastic, or Point-of-Sale Checks? (Page 51) ABA Banking Journal - December 2006 - Paper, Plastic, or Point-of-Sale Checks? (Page 52) ABA Banking Journal - December 2006 - Compliance Mailbox (Page 53) ABA Banking Journal - December 2006 - Compliance Mailbox (Page 54) ABA Banking Journal - December 2006 - Compliance Mailbox (Page 55) ABA Banking Journal - December 2006 - Compliance Mailbox (Page 56) ABA Banking Journal - December 2006 - Compliance Mailbox (Page 57) ABA Banking Journal - December 2006 - Banker's Mart (Page 58) ABA Banking Journal - December 2006 - To Advertise/Index of Advertisers (Page 59) ABA Banking Journal - December 2006 - The Economy (Page 60) ABA Banking Journal - December 2006 - The Economy (Page Cover3) ABA Banking Journal - December 2006 - The Economy (Page Cover4) http://www.nxtbookMEDIA.com
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