Pact Marks Trend among Technologically Advanced Banks to Sell Nontransactional Financial Data to Corporations
Ferris, Tom, American Banker
NEW YORK -- Citibank's joint venture with McGraw-Hill Inc. is one of the most striking examples yet of a trend among high-technology banks to emphasize the sale of broad-based financial data to corporations, observers said Tuesday.
Banks that provide operating services to companies have long seen the value of supplementing transactional services with such closely related data as account balances and notification of payments. But now some large institutions are moving closer to the information business itself by selling financial information -- such as foreign-exchange rates or news headlines -- that is not directly connected to an underlying transaction.
One example is the Los Angeles-based Security Pacific National Bank, which recently started providing late-breaking financial news, economic reports, and interest and commodity rates to corporate cash managers.
Citibank's venture with McGraw-Hill goes several steps further, linking the initial provision of generic financial data -- specifically, price quotes on oil products -- to the settlement of a resulting transaction.
"This is just the tip of the iceberg," said Lawrence C. Russell, a senior vice president of First National Bank of Chicago, reacting to the announcement. "My view is that we will be selling a wide array of information to corporations."
First Chicago is already moving in this direction, Mr. Russell said. The Rand McNally & Co. that contains prevailing freight rates for all classes of goods, he said. A company needing to ship goods can access the data base with a computer terminal to select the most inexpensive trucking company, which can result in savings of 8% to 11%, according to Mr. Russell.
Payment for the deal can be handled separatedly by check, but First Chicago is encouraging its customers to pay electronically, through the automated clearing house payment network, he said. In this process, invoice data would accompany the transaction over the network and would be delivered to the trucking company via a terminal. "The real benefits result when you put all the steps together," he said.
First Chicago is working on similar arrangements with other industries, including the food industry, he said. …