The acquisition of First International Bancorp by UPS Capital (see story, page 14) highlights the ways in which global business-to-business (B2B) marketplaces have created new opportunities for financial services companies.
First International shed its last retail branches and accounts in 1999 to focus on lending to small to medium-sized industrial companies in domestic and international markets. "We're a very narrow niche player," said Steven Greene, senior vice president of e-business development at Hartford, Conn.-based First International. "We basically offer credit to industrial companies. That's all we do."
First International's $328 million asset base largely consists of dollar-denominated loans ranging from $100,000 to $5 million, guaranteed by either the Small Business Administration, the U.S. Department of Agriculture or the Export-Import Bank (Ex-Im Bank). After making over 150 Ex-Im Bank loans last year, First International received the President's "E" Award from the U.S. Department of Commerce for outstanding performance in export service.
To support its global lending business, the bank contracts with "master agents" in emerging markets including Argentina, Brazil, Central America, Egypt, India, Indonesia, Korea, Mexico, North Africa, Philippines, Poland, South Africa, Turkey and West Africa. The bank also operates in several Western European countries through a recent partnership.
First International has entered into alliances with 19 B2B online marketplaces, including those for chemicals, textiles, steels, forged metals, plastics, aerospace parts and surplus assets. The bank's alliances give both sides "limited mutual exclusivity," in that each party refrains from partnering with direct competitors.
With "people on the ground," First International facilitates B2B transactions by evaluating the financial and operational characteristics of potential borrowers. For example, a U.S. company selling surplus industrial equipment on the Online Asset Exchange-a B2B marketplace-might be faced with choosing between a high bid from a foreign buyer and a lower bid from a domestic buyer of which it has greater knowledge and with whom it shares a common language. Without the participation of a trusted financial intermediary, the seller might be forced to accept the lower bid.
"We'll organize the payment for the buyer directly, and we'll pay the seller when they ship the goods," said Greene. "It's both credit as well as trust."
To support its B2B partnerships, First International developed ThruCredit, an online loan origination platform. The software steps potential borrowers through the loan options available and provides printable versions of the forms and documents appropriate to the loan product and borrower's country of origin. Borrowers can also track loan and application status online.
Small- to medium-sized privately-held industrial firms typically lack the IT savvy required to move the entire lending process to a virtual setting. "There's really no way today for us to receive financial statements electronically," said Greene. "That's probably one of the biggest gaps right now in terms of automation."
Although the solution falls short of end-to-end paperless lending, the gap is not seen as a major impediment in First International's core market. "For a $25,000 loan, they want instant online service," said Greene.