Magazine article American Banker

Canadian Processing Partnerships a Model for U.S.?

Magazine article American Banker

Canadian Processing Partnerships a Model for U.S.?

Article excerpt

A pair of Canadian joint ventures have U.S. bankers looking north for insight into whether fierce banking competitors can cooperate effectively, experts said.

The ventures, involving Canada's five largest financial institutions, change abruptly the face of bank back office processing in that country.

Last week Canadian Imperial Bank of Commerce and Scotiabank announced a broad alliance that, in effect, merges their back offices. The two Toronto-based banks will set up a company to manage their item processing, telecommunications networks, and data centers.

Earlier in the month, a consortium formed by Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Montreal announced a separate deal involving only item processing.

If successful, the alliances, which are aimed at building scale and reducing processing costs, could inspire changes in the United States, industry experts said.

"I think the more proactive banks are thinking very seriously about forming processing alliances," said Stan Lepeak, program director at Meta, a consulting firm in Stamford, Conn. "It's taken on the form of a religious debate."

Joint ventures make sense "from a scale point of view," added Doug Halvorsen, marketing manager for Payment Solutions, the document processing unit of International Business Machines Corp. that has consulted with banks on alliances. "But the idea has met with some resistance here."

Executives at Canadian Imperial and Scotiabank cited cost pressures and the need to get access to new technologies as reasons for their joining forces. …

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