Financial institutions cautiously move in B2B market

IDG News Service - BOSTON

Banks and financial institutions have been cautious to adopt new technologies, industry executives and analysts said during the EuroFinance conference in Boston this week.

The adoption of special online financial service packages that assist with moving money and with standard processes such as lending, letters of credit and dealing in foreign exchange is slow but progressing, said participants of panel discussion Monday on how banks are reinventing themselves for the business-to-business world.

"In terms of financial services firms, they are looking for ways to make themselves more relevant for the e-business world," said John Hagerty, senior vice president of financial services practices for AMR Research Inc. in Boston. "But the nature of the relationship between banker and customer has the potential to totally change, so they are trying to figure out how it will change and play by the new rules."

As companies like ETrade Securities Inc. pushed financial institutions to be more receptive to customers' needs, business-to-business market places will force banks to get more heavily into electronic business, he said.

"They realize now that their business has to change," Hagerty said.

It is coming with a bit of reluctance, however. As former General Electric Co. CEO Jack Welch once said, "You have to destroy your business," quoted Aamir Farooqi, managing director of Cargill eVentures in Wayzata, Minn., a venture capital firm and wholly owned subsidiary of Cargill Inc.

"The financial industry is very unwilling to destroy themselves," Farooqui said after the panel discussion Monday. "In their minds, nothing is broken. I do think that the financial institutions have formidable talent and they are not using that talent very well."

Jay Fudemberg, president and CEO of Pure Markets Corp., echoed Farooqui's comments during the panel discussion.

"They [financial institutions] have gotten very good at what they do," Fudemberg said. "They are built around what they do and they don't get good by changing what they do."

It also may be about changing behavior and about companies being willing to experiment, Fudemberg said. San Francisco-based Pure Markets, which brings together lessees and lessors or syndicators/sellers and buyers in a neutral marketplace, is seeing a lot of customers dipping their toes in to try out the new technologies, he said. Pure Markets is feeling both a positive momentum in market interest but also the confusion and uncertainty of the financial market conditions, he said.

"I just think the natural process of penetration takes time," Fudemberg said. "I think in the next 12 months we're going to see some real acceleration."

In all of this, financial institutions have to play a role in telling their customers that they should automate the supply chain, said Ken Deveaux, senior vice president and director of business-to-business e-commerce at FleetBoston Financial Corp. But they also have the baggage of legacy systems and Wall Street investors' concerns of a quarterly earnings miss. New infrastructure may not be easy to sell if those factors are considered, Deveaux said.