Bank of Montreal targets B2B with new platform

The Bank of Montreal’s (BMO) launch of its Procure2Pay B2B system may shake up the Internet business payments market as BMO tries latch onto the growing revenue stream being generated by online business-to-business, says one analyst.

BMO ePurchasing Solutions, a division of BMO, launched Procure2Pay last week. Procure2Pay is a Web-based procurement system that allows customized online ordering and payments to be executed, reconciled and integrated into the buyer’s ERP (enterprise resource planning) systems. Unlike many other systems, says BMO, the payment infrastructure of their new system allows payments to be initiated by the supplier or buyer.

“There are companies, non-banks, which are doing this: Clareon, Clarus, BankServe, PeopleSoft, and MarketPay, and what is interesting here is that this is a bank developing a bank-neutral network,” says Joseph Marino, an analyst with Current Analysis in Sterling, Va. “This is a tweak that competitors have to recognize and adjust their strategies to.”

BMO’s Procure2Pay is unique, adds Marino, because unlike other financial institutions that would partner with a B2B software vendor BMO is developing its own in-house system.

The difficulty for software vendors such as Clareon who can develop bank neutral networks and are working on them is that they don’t have the financial services arm that BMO has and are dependent on venture capitalists that are not as willing to shell out the cash as they once did before the tech sector began to fall out of favour this year, points out Marino.

“Only banks can leverage that sort of power,” Marino says. “There are companies that are non-banks that are trying to get control of this transactional information and charge for it, but they can never cross that line into actually setting terms for the actual extending of the money itself.”

Randy Ford, director of business-to-business with solutions for electronic banking services with BMO, says the bank is not trying to build a marketplace all at once but rather precede one client at a time focusing on large U.S. multinational companies that already do business with the bank.

Ford says the BMO is simply building on its purchasing card (called a P-card, procurement card or a corporate card) capability, which almost every Fortune 1000 company has, as the way to get into the door.

“Once we win the deal we now have the opportunity and the solutions to move them into a larger area of spend and reengineering,” Ford says. “I think that’s really critical because once we do get in we have the opportunity to move more commodities and their spend onto this platform. They get the reengineering benefits and of course we win as well.”

Marino says, that BMO is looking to diversify its revenue streams as they find themselves in a more competitive environment. As business-to-business grows and organizations and their suppliers exchange goods and services through Internet transactions the banks will not be handling as many of these transactions as they once did. However, this area of cash management services can account for up to 40 per cent of a bank’s revenue and this has led some banks, such as BMO, to develop a more aggressive approach to move themselves into e-commerce and e-business, says Marino.

“It’s to reassert their control over the cash management services,” says Marino. “It’s just eroding. There are various lines of bank business that are being eroded by open systems technologies and you know if they go to sleep like Rip van Winkle there’ll be a new financial scenario out there,” he says. “The sooner they get into the game, the sooner they take a more proactive situation.”

“If you think about this, logically, the business that we’re in as a prime business is a payments business,” says BMO’s Ford. “Developing all the technology around that is delivering value to the client to be able to retain that opportunity to continue to do those payments. I mean certainly nobody wants to [lose] core businesses that they’ve been very strong in,” he points out.

The major obstacle facing BMO in this market is their size, says Marino. He points out that BMO “isn’t a top ten bank it’s a top 50 bank.”

“The gap between the top ten and the 50 th [bank] is huge, but still [BMO] is a significant bank and certainly within the markets in which its wants to be formidable this is a very distinctive maneuver,” Marino says referring to the introduction of Procure2Pay.

Ford admits that the biggest hurdle is the ability for U.S. corporations to feel comfortable dealing with a bank that is not as well known in the United States versus the “trusted aspect of some of the bigger players in the United States,” however, he says: “I’m really comfortable with the fact that we have got the product suites to be able to deliver to that market and I’m very comfortable with the execution capabilities that we have.”

Still to be able to get into the very huge accounts you really do need the reputation of one of the big integrators, such as KPMG, Accenture (formerly Anderson), PWC, or a Deloitte behind you, says Marino.

“Though they’re trusted as being a bank they’re not as trusted as having the ability to handle the mission critical task that’s at hand,” Marino adds.

Procure2Pay is currently being implemented as a pilot in the United States and Canada, with Deluxe Laboratories Inc., of Hollywood Calif., and Syncrude Canada Ltd., of Fort McMurray, Alta.

The Bank of Montreal can be reached at Current Analysis is at