High INTEREST.

FINANCE EXPERTS WANT GLOBAL E-BANKING.

IS CORPORATE E-BANKING real? In Brazil, consumer banking over the Internet in 2000 registered 6.8 million transactions, up from 2.6 million in 1998, according to Febraban, the country's banking federation.

Banking between companies, seemingly a natural, lags behind. Transactions were just 1.5 million in 2000, up from a half million in 1998. Things are picking up, but companies are taking the slow road.

Latin America's banking behemoths, meanwhile, are prepping their best clients for Internet banking, polishing PowerPoint slides and talking a good game: frictionless banking will make your firm faster, stronger, more agile! Following a decade of heavy investment that continues to this day, Brazilian, Spanish and U.S. financial icons promise a knockout punch of financial muscle and cutting-edge technology.

It might not be so easy. Looking for a dose of realism from the other side of the conference table, LATIN TRADE asked regional CFOs and finance experts what the banks must do to win. Partly, they say, finance directors are holding back because of security concerns. Partly, too, they are battling to make sense of the real-world banking in the region, never mind the glories of the virtual world ahead. They want Internet efficiency, but so much of their everyday work is confusing enough for now.

Here, then, are their five rules for getting corporate e-banking right:

RULE NO. 1

Lobby for standardized regulations.

Moving money in Latin America is about as much fun as herding cats, CFOs say. Rules from country to country vary widely, and banks must kowtow to domestic regulations to stay in business. Some regulation is fine, but the lack of international standards makes it hard to get things done.

As countries move toward trade zones, countries should harmonize regulations. A unified currency in Latin America would be a boost but, short of that, countries should aim for rules that foster predictable money flows. Banks can make the case to governments for greater similarity of transaction rules and laws.

Without unified rules, big firms with financial muscle will use e-banking advances instead to centralize global operations, as did data networking company 3Com, which runs its financial operations from Santa Clara, California.

"It's helped us a lot. For example, even when I am in Miami I can approve special payments," says Adriano Gaudencio, 3Com's CFO for the Latin America region. "I can check what's going on in Colombia or in Argentina. I can print accounts. I can do banking reconciliation immediately."

But e-banking hits a wall when things get complicated. Tax payments in Brazil can be done only by certain banks, Gaudencio says. "When I have to pay a tax, I have to use an office boy to go into the bank to pay the tax," he says. "I have at least two banks for all operations."

RULE NO. 2

Security first, then business. In the CFO's world, no efficiency is worthwhile if there is risk. Paperless banking, especially if it crosses borders with relative ease, is attractive--but it also is subject to attacks from hackers seeking to exploit weaknesses in Web site design. Fixing a defaced corporate site is one thing, but losing millions of dollars to full-time cyber thieves is quite another.

Companies have solved these problems in the past by building their own networks, hooking up servers on secure phone lines at great expense. Now banks and their partners in the Internet infrastructure business--global telecoms, broadband providers and undersea cable companies--have a tall order: Prove the financial superhighway is as safe, or safer, than the old ways.

"Everything is in transition," says Innerhost CFO Wayne Wisehart. "The concern of CFOs is the security of the whole thing. I think that's where [banks] need to focus first."

Miami-based Innerhost, which provides managed Internet hosting for companies in the Americas, is just now dealing with the daily irritations of having clients in a dozen or more foreign countries. CFOs with more experience in the region report that e-banking--although in its infancy--essentially works. Accounts can be checked from anywhere in the world, payments can be approved and costs, high at the beginning, have come down substantially. "Right now I believe security is better," 3Com's Gaudencio says. "I don't know if we can really trust it, but it's better."

RULE NO. 3

Solve my problems, earn my loyalty. The tangled web of tax laws means money moves in less-efficient ways, CFOs complain. Sure, you have to pay taxes, but does meeting tax obligations necessarily mean tying up money for quarter after quarter, waiting for the tax man to act? Sorting out the ramifications on a balance sheet is hard; e-banks should get involved in making it easier.

"The tax laws are very different between countries and [e-banks] don't have the capability to do that," says Jose Tam, director of e-business for financial services in Latin America at KPMG Consulting. "Even ourselves, we are struggling, sometimes, managing taxes. You have to be very careful with laws."

E-banks are working on integrating information with financial services, says Tam. Twenty-five percent of Mexican businesses are using the Internet to do banking, KPMG has found. Of those, 80% use the Web for fully half of their banking activities.

For the rest of the time, companies still need telephone service and face-to-face help. Integrating traditional contact with Internet banking efficiencies is the goal, but legal and tax issues--rather than technical problems--are at the crux of any problems companies face.

"The issue of withholding is a big issue for every CFO who works internationally," says Wisehart, of Innerhost. "It's a significant amount of money, and you have to figure out how to do that at a minimum cost. The rules vary, and you have to understand it in every country." It's hard to click your way into a clear understanding of tax laws.

RULE NO. 4:

Be a partner, not a funnel. Companies need banks to move the money, but they need much more. For too long, most financial institutions focused just on handling the cash. Companies would love to outsource costs--especially repetitive back office tasks. That means adding services like supply-chain management to more traditional offerings, such as reconciliation and cash transfers.

"At this point, they have to think about our value proposition as a company, and how they fit into the value proposition. Not just transactions, but getting into our value chain," says Ramon Martinez, finance director for Latin America at communications equipment and software maker Avaya. "We're looking at outsourcing our processes as much as possible. We use the possibility of driving costs out of our structure, plus integrating bankers into our process."

Some have reservations about opening up the books to outsiders. But, if giving up financial data to a partner means lower costs, CFOs will jump to secure, reliable services. Control is an issue--finance chiefs will want to watch every penny from anywhere they happen to be--but a well-run bank can sell itself as a long-term partner, then add services as the relationship matures. An outsider, or a bank that goofs up the numbers, is less likely to earn that trust or the business.

Luckily, banks are already headed, albeit slowly, in this direction, and the Internet naturally lends itself to automating the easiest tasks, allowing financial institutions to insert themselves into their clients' processes.

Web pages can be tailored to each customer, providing a personalized, live connection--automating simple things but allowing for direct contact when problems get tougher. "You're not going to spend any time on the rote stuff, you're going to spend time on the higher-value stuff," says Hernan Narea, CEO of LoanQuorum.com, a secondary loan market portal. "Technology frees up higher-value human capital."

RULE NO. 5

Be everywhere, or work with each other. If the CFOs have any single complaint, it's that they are spreading business around too much. They would vastly prefer to work with one organization that can do what they need in any country they need.

Banks are responding, as shown by investments from Spain's Banco Santander Central Hispano and Banco Bilbao Vizcaya Argentaria of the past few years, capped by Citibank's recent surprise moves in Mexico and Brazil. These big players must now provide a truly global answer to the nagging question that keeps CFOs up nights: Where's my money now?

"We're looking for banks which will provide a global solution, centralizing our operations at a regional level or at a global level," says Martinez at Avaya. "Right now there isn't one bank that can do it for us. We're looking at three different banks."

To a degree, money management is at cross purposes in a region as large and diverse as Latin America. Avaya, like other firms, is trying to figure out how to handle cash in Mexico while still offering timely service to clients in Argentina.

In the short term, Martinez says, the savings from centralizing finances is interesting. But companies must still deal with separate banks in separate countries, which keeps some things slow for now. "In the future, as some of these barriers are reduced, we can start really thinking about dealing with a bank that's not neessarily inside your borders," Martinez says. That's the challenge. And the customer is always right.