American Banker

Latin American Ventures Point the Way For Banks to Cash in on B-to-B

Latin America's banking sector is showing the United States how to nail business-to-business electronic commerce.

By Daniel Baranowski, Lee Delaney and Eric Aboaf

First published on Οκτωβρίου 13, 2000
min read


Latin America is showing the United States a thing or two more than just flashy soccer moves. In the banking sector, it's showing us how to nail business-to-business electronic commerce. Though the development of Internet commerce in Latin America lags the United States by two to three years, banks there are rolling out their B-to-B strategies much more quickly. For instance, the Banamex's B-to-B joint venture with Commerce One, the California e-commerce company, was formed at an amazingly early stage in the Latin Internet market's evolution. At a comparable stage in the U.S. Internet market's evolution (around 1997) practically no banks had even thought about, much less announced the development of B-to-B exchanges. Latin American banks are positioned to be leaders in electronic marketplaces and e-payment solutions. Three Latin banks that are leading the B-to-B charge are Banamex, Bradesco, and Unibanco. Banamex was the first bank to attack the B-to-B segment when it announced a joint venture in December with Commerce One. The partners will invest $35 million this year to roll out Artikos.com, an e-procurement portal targeting small and midsize businesses. In July, Brazil's Bradesco announced that it would team up with the Brazilian industrial conglomerate Votorantim and two Mexican giants, the cement company Cemex and the industrial conglomerate Alfa, to create an e-procurement marketplace named Latinexus. The consortium expects to invest up to $100 million over the next three years in the exchange, which aims to coordinate B-to-B transactions in the region. In August, Brazil's Unibanco, Argentina's Galicia Bank, and Portugal Telecom announced that they would invest around $60 million to create vertical and horizontal B-to-B portals in the Mercosur region. Considering that global B-to-B is expected to grow to $6.3 trillion by 2004, U.S. banks developing B-to-B strategies for international markets would do well to study three key factors that have positioned Latin banks to succeed: Leveraging technological capabilities. Latin banks are touting their technology leadership to attract B-to-B commerce. In many countries they've become technology leaders as a result of years of high inflation and financial turbulence. This environment required them to invest in infrastructure for rapid transactions in an era when time was literally money. In fact, in Brazil many small and midsize businesses trust and rely on their banks to assist them with information technology issues. Forging corporate partnerships early on. Latin banking e-procurement ventures, such as Latinexus, have taken the approach of signing up large corporations to participate from the start. This gives the exchange immediate scale and liquidity and is crucial to getting smaller buyers and sellers to join. This contrasts with the U.S. banks' approach of "If we build it, they will come." Collaborating with customers. Latin American banks are working to leverage long-standing customer relationships and intimate knowledge of their clients' supply chains and procurement processes. They are positioning B-to-B offerings as another step in deepening their collaboration with customers. Additionally, Latin banks have positioned themselves with customers as the most credible and secure transacting environment in a region that lacks dependable, established e-marketplaces. Only a few exchanges in Latin America are currently hosting transactions, but banks will be in the right place with the right solutions as transaction volume grows. In fact, in many international markets, global banks are well positioned to be powerful players in B-to-B. Corporate customers will see significant value in banks' ability to aggregate buyers and sellers, offer value-added services, and provide comprehensive payment solutions. Visionary banks will not see the Internet simply as a means to cut costs and shift service online, but rather as an opportunity to enhance revenues and, in turn, profits. Banks that effectively execute their B-to-B strategies will realize the ultimate shareholder reward: higher stock prices resulting from the creation of value. Mr. Baranowski is an associate consultant, Mr. Delancey a manager, and Mr. Aboaf a vice president at a Boston-based Bain & Co., a global strategy consulting firm.

Latin America is showing the United States a thing or two more than just flashy soccer moves.

In the banking sector, it's showing us how to nail business-to-business electronic commerce.

Though the development of Internet commerce in Latin America lags the United States by two to three years, banks there are rolling out their B-to-B strategies much more quickly.

For instance, the Banamex's B-to-B joint venture with Commerce One, the California e-commerce company, was formed at an amazingly early stage in the Latin Internet market's evolution. At a comparable stage in the U.S. Internet market's evolution (around 1997) practically no banks had even thought about, much less announced the development of B-to-B exchanges.

Latin American banks are positioned to be leaders in electronic marketplaces and e-payment solutions.

Three Latin banks that are leading the B-to-B charge are Banamex, Bradesco, and Unibanco.

Banamex was the first bank to attack the B-to-B segment when it announced a joint venture in December with Commerce One. The partners will invest $35 million this year to roll out Artikos.com, an e-procurement portal targeting small and midsize businesses.

In July, Brazil's Bradesco announced that it would team up with the Brazilian industrial conglomerate Votorantim and two Mexican giants, the cement company Cemex and the industrial conglomerate Alfa, to create an e-procurement marketplace named Latinexus. The consortium expects to invest up to $100 million over the next three years in the exchange, which aims to coordinate B-to-B transactions in the region.

In August, Brazil's Unibanco, Argentina's Galicia Bank, and Portugal Telecom announced that they would invest around $60 million to create vertical and horizontal B-to-B portals in the Mercosur region.

Considering that global B-to-B is expected to grow to $6.3 trillion by 2004, U.S. banks developing B-to-B strategies for international markets would do well to study three key factors that have positioned Latin banks to succeed:

Leveraging technological capabilities. Latin banks are touting their technology leadership to attract B-to-B commerce. In many countries they've become technology leaders as a result of years of high inflation and financial turbulence.

This environment required them to invest in infrastructure for rapid transactions in an era when time was literally money. In fact, in Brazil many small and midsize businesses trust and rely on their banks to assist them with information technology issues.

Forging corporate partnerships early on. Latin banking e-procurement ventures, such as Latinexus, have taken the approach of signing up large corporations to participate from the start. This gives the exchange immediate scale and liquidity and is crucial to getting smaller buyers and sellers to join. This contrasts with the U.S. banks' approach of "If we build it, they will come."

Collaborating with customers. Latin American banks are working to leverage long-standing customer relationships and intimate knowledge of their clients' supply chains and procurement processes. They are positioning B-to-B offerings as another step in deepening their collaboration with customers.

Additionally, Latin banks have positioned themselves with customers as the most credible and secure transacting environment in a region that lacks dependable, established e-marketplaces.

Only a few exchanges in Latin America are currently hosting transactions, but banks will be in the right place with the right solutions as transaction volume grows. In fact, in many international markets, global banks are well positioned to be powerful players in B-to-B.

Corporate customers will see significant value in banks' ability to aggregate buyers and sellers, offer value-added services, and provide comprehensive payment solutions.

Visionary banks will not see the Internet simply as a means to cut costs and shift service online, but rather as an opportunity to enhance revenues and, in turn, profits. Banks that effectively execute their B-to-B strategies will realize the ultimate shareholder reward: higher stock prices resulting from the creation of value.

Mr. Baranowski is an associate consultant, Mr. Delancey a manager, and Mr. Aboaf a vice president at a Boston-based Bain & Co., a global strategy consulting firm.