i2eX is a global electronic platform for trade management. Traders can log on, create electronic purchase orders and shipping documents, receive online approval and shipment acceptance, and gain access to pre-export and post-export financing via a pre-approved credit line. Companies can also use the platform as a central database for reporting, and moving data between trade office systems. In addition, the platform enables State Street to analyze and manage the company's cash flow.
"We recognize the reality, and there is a lot of pressure on banks to streamline the operations side of trade finance. To process the traditional letter of credit, it can cost up to one and a half percent of the transaction, not to mention the soft costs, such as manual labour and time," says Patrick Ho, regional manager for global trade banking at State Street in Hong Kong. "With Open Account Trader, it will be a fraction of those costs."
Ho says letters of credit will continue for smaller buyers, but for companies like Wal-mart or Toys-R-Us, Open Account Trader is an alternative. "For larger importers that have been in the market for a long time and have been dealing with the same suppliers for years and years why would they still want to use a letter of credit?" questions Ho. Furthermore, according to Ho, the settlement cycle can be compressed to 24 hours.
Open Account Trader is being piloted with a number of major vendors, aside from New Balance. The pilot companies so far have been consumer product vendors, but Ho says that those dealing in commodities can just as easily use the system.