Mexico invests in Internet banking

Global Finance, Dec 2000 by Thurston, Charles W

Financial institutions and other companies in Mexico are moving steadily forward in the provision of services over the Internet, despite a still weak banking sector and a generally cool corporate attitude to the Web.

The starting base for B2B e-commerce is small in Latin America, but growth is projected to rise from a rate of 2% per year to 7% per year by 2003, according to the Boston Consulting Group. In a typical national Internet evolution model, the B2B market in Mexico trails the burgeoning B2C market, but the Internet usage base is expected to triple over the next three years, to five million users. Thus the stage for B2B growth will be well established, and the demand for more e-finance services on a corporate level will intensify.

Despite the slow start, Internet access to financial services is helping bridge the gap between service offerings to multinationals and offerings to the typically smaller-scale Mexican corporation. "Smaller companies are eager to have Web access to financial services that previously were available only to very large companies," says Jorge Colin, director of investor relations at Monterrey-based Banorte.

As banks in particular rise to the Internet challenge, the consolidation of the banking sector should be hastened.The financial sector is still recovering from the 1994 peso crisis and the 1997 Asian crisis, and it is still adjusting to the wave of foreign investment that followed.

But the biggest banks in Mexico are leading the way in readying Internet capabilities. Banamex, for example, has been building its e-finance infrastructure for about a year, tapping Unisys in a multiyear, multimillion-dollar contract for a strategic electronic business channel development. Similarly, Banorte currently is help ing 5,000 of its corporate clients migrate from dial-up PC banking to its Webbased services. "We can then easily double the number of companies in a year's time," says Colin.

Another welcome surge in e-finance provision is expected as Mexico's revamped pension system begins to gather steam and more investors take charge of their retirement accounts. "The pyramid of income is extreme, and the guys on the top are the first to approach the Internet product," says Manuel Alonso Somoza, CEO of Prudential Apolo, a mutual investment house in Mexico City The volume of personal savings in Mexico's pension system is projected to exceed the current level of savings through simple bank accounts, says Colin.

At the same time as leading financial institutions are offering more complete corporate services to clients, other major industry players in B2B vertical networks are helping the banks to offer e-finance services. Cement giant Cemex, for example, recently formed a subsidiary, CxNetworks, to pursue such Internet business, with a war chest of $200 million to invest over the next two years. CxNetworks already has partnered with i2 Technologies in San Diego, California, to provide a network solution for the construction industry marketplace it plans to develop.

"We can enable a construction company to send blueprints to the banks online, and the idea is the more banks they are sent to, the better," says Juan Pablo San Agustin, CEO of CxNetworks in Monterrey. "We want to offer construction companies online working capital" As CxNetworks develops strategic partnerships with leading Mexican banks for domestic payment services resulting from business on the site, talks are being held with global banks that can handle intraregional payments between countries, San Agustin says.

Other major manufacturers in Mexico are also pursuing B2B opportunities. Steel manufacturer IMSA, for example, has contracted Andersen Consuiting to help formulate its B2B strategy, says Adrian Fernandez, manager of corporate finance.

Providing Internet-based logistics services across various sectors is the ambitious plan of botting giant FEMSA, which reorganized its Logistica unit early this year to focus on supply chain logistic services for third parties in Mexico. With the October formation of Solistica.com, a joint venture with Oracle, FEMSA has been progressively pushing its services to theWeb."The target market we are pursuing offers enormous opportunities to increase efficiencies," says Jose Gonzalez, executive vice president of FEMSA Logistics in Monterrey. Adds Oracle de Mexico CEO Fernando Prieto: "Solistica.com represents the first 13213 site for transportation and logistics in Latin America that will provide its clients with a virtual market based on the most advanced technology today; this will integrate carriers and service and product providers to the shippers, facilitating business transactions among them."

Consumer-oriented Internet portals are also important facilitators of e-finance services in Mexico. Alo.com, a major content creator, has aligned itself with four Mexican banks providing B2C financial services, says CEO Guillermo Canedo in Mexico City. Now the portal is negotiating with a global bank to provide international financial services, he says. The creation of financial information content is another growing field of operations, and here Alo.com is an early leader. "We just happen also to be a dot-com," says Canedo. The portal forged a joint venture with Grupo Bursametrica, the Mexico City economic analysts, to provide financial information on the Web site, including sophisticated charts and graphs. Bursametrica also provides financial data to Standard & Poor's through a similar strategic alliance, says Ernesto O'Farrill, president of the analysis firm.