B2B Banking Strategies for International Markets: Lessons Learned from Latin America

B2B Banking Strategies for International Markets: Lessons Learned from Latin America

Latin America is showing the US a thing or two more than just flashy soccer moves. In the banking sector, it's how to nail B2B e-commerce.

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B2B Banking Strategies for International Markets: Lessons Learned from Latin America

Latin America is showing the US a thing or two more than just flashy soccer moves. In the banking sector, it's how to nail B2B e-commerce. Whereas US banks moved late in this space and have little to show to date, Latin American banks are positioned to be leaders in both eMarketplaces and in the promising horizontal space of e-payment solutions. This comes at a time when global B2B is expected to grow to $6.3 trillion by 2004, over half of which will come from outside of the US

The good news is that global banks can look to the Latin banks' formula to craft their own recipes for success in international markets. Elements of the Latin American approach to B2B include: collaborating with customers, forging corporate partnerships from the start, leveraging leadership in technology; moving relatively early to market; and exploiting lower levels of competition.

By contrast, in the US, banks were late to the B2B market in creating exchanges and in providing e-payment solutions (credit authentication, back-end processing, payments and settlement, etc.) to clients and web businesses. Leading non-bank B2B eMarketplaces started to be developed as early as 1997 and there are currently over 500 neutral market-makers and consortia-led exchanges in operation. However, major US banks such as Chase, Bank of America and Wells Fargo didn't even start announcing their eMarketplace ventures until early 2000. Additionally, it was not until recently that US banks finally announced e-payment ventures, a B2B solution that may offer a significant opportunity for value creation. Although large banks have strong internal capabilities in the e-payments space, they will face tough competition from early moving start-ups like eCredit. In order to succeed they will need to quickly roll out comprehensive, high-quality payment solutions and aggressively sign up major exchanges and corporate customers. Banks that are unable to do this will be relegated to offering commoditized, low-value added services such as transaction execution.

The story in Latin America, however, is quite different, and three Latin banks that are leading the B2B charge are Banamex, Bradesco and Unibanco. Banamex was the first bank to attack the B2B segment when it announced a joint venture with Commerce One in December of 1999. The partners will invest $35M this year to roll out, an e-procurement portal targeting small- and medium-sized businesses. In July, Brazil's Bradesco announce that it is teaming up with Votorantim, Cemex and Alfa to create an e-procurement marketplace named Latinexus. The consortium expects to invest between $75M-$100M over the next three years in the exchange, which aims to coordinate B2B transactions in the region. In August Brazil's Unibanco, Argentina's Galicia Bank and Portugal Telecom announced that they would invest around $60M to create vertical and horizontal B2B portals in the Mercosur region.

Global banks developing B2B strategies for international markets would do well to study five key factors that have positioned these and other Latin banks to succeed in B2B:

  • Collaborating with Customers - In Latin America banks are working to leverage long-standing customer relationships and intimate knowledge of their clients' supply chains and procurement processes. They are positioning B2B offerings as another step in deepening collaboration with customers. Additionally, Latin banks have positioned themselves with customers as the most credible and secure transacting environment in a region which lacks dependable, established eMarketplaces.

  • Forging Corporate Partnerships - A few Latin banking e-procurement ventures are presciently signing-up large corporations to participate at the outset. This gives the exchange immediate scale and liquidity and is crucial to getting smaller buyers and sellers to join. Additionally, large corporations bring to the table an in-depth understanding of their industry, including peculiarities in the procurement process and what services can truly add value. To date only Latinexus, Citibank Brazil (agrobusiness exchange) and Unibanco/Galicia, to a degree, have adapted this strategy of partnering up-front with corporations but other exchanges would be wise to follow their lead.

  • Leveraging Technology Leadership - Latin banks are touting their technology leadership to attract B2B business. 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 where time was literally money. In fact, in Brazil many small- and medium-sized businesses trust and rely on their banks to assist them with IT issues. Banks have also been quick to partner with technology firms like Ariba and Commerce One in areas where they lack internal capabilities, such as building the infrastructure behind eMarketplaces.

  • Moving Early in the Market Cycle - Internet markets in different countries and regions are at different stages of development. The Latin American market is about two or three years behind the US market, but has been evolving much more quickly as local players act on lessons learned from North America. Given this, Latin banks moved relatively early to roll out their B2B strategies. The Banamex/ Commerce One joint venture was formed at an amazingly early stage in the Latin Internet market's evolution, analogous to where the US market was at in 1997. At that point practically no B2B exchanges had been announced and only a handful were even in development.

  • Exploiting Lower Levels of Competition - The type and degree of B2B competition that banks face differs by country and region. In Latin America, start-up and industry specific consortia exchanges will be nowhere near as powerful as they are in the US. While banks are flush with cash, many Latin B2B start-ups will not get past first-round financing and will have trouble establishing critical mass. Additionally, industry consortia exchanges will not be very popular, partially due to Latin American companies' reluctance to enter into joint ventures where they don't have majority control. In the e-payments space, banks will also face much less competition from start-ups.

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 B2B. Corporate customers will see significant value in banks' ability to aggregate buyers and sellers, offer value-added services and provide comprehensive payment solutions. To succeed abroad banks must adapt their B2B strategies to local market conditions, move quickly and leverage their customer relationships.

Equally important to note: these exchanges will not make much money by simply executing transactions. The path to profits lies in deepening the customer relationship by offering a wide selection of value-added services such as: in-bound logistics, inventory management/ securitization, credit services, trade financing, electronic billing, payment and settlement etc. The ability to offer one-stop shopping or an online financial supermarket will be very attractive to customers. Visionary banks will not see the Internet simply as a means to cut costs and shift service on-line but rather as a revenue- and, in turn, profit-enhancing opportunity. Banks that effectively execute their B2B strategies will realize the ultimate shareholder reward: Higher stock prices resulting from the creation of new value.

Bain Contacts:

USA - Daniel Baranowski ( is an Associate Consultant and Lee Delaney ( is a Manager at Bain & Company. Eric Aboaf ( is a Vice President in Bain's Financial Services Practice.

Latin America - André Castellini ( is Vice President of Bain São Paulo and Karchi Lukac ( is Managing Director of Bain Mexico.

Bain and Company is a global strategy consulting firm with over 2,500 professionals and 26 offices around the world.

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