Bank of Bermuda has been successful in attracting Fortune 500 companies to Bermuda - not through processing on-line merchant activity, but through the use of a more profitable kind of e-commerce, according to Michael Collins, head of banking services at Bank of Bermuda.

He said that while online merchant acquiring may be something for other jurisdictions, it was not what Bermuda should go after. Instead it should focus on more established profitable companies. "E-commerce in my mind is to try and make things easier and give opportunities to consumers, both companies and individuals and I think credit card processing is an interesting business but it is certainly a side issue in the Bermuda market," said Mr. Collins

The bank has come under criticism that it does not do online merchant processing and accused of hampering the progress of e-commerce on the Island because of this decision.

Yesterday, the bank's chief executive officer Henry Smith defended his actions and said that the business was too risky for the bank. The bank has been stung by credit card fraud and by investment in payment processing for e-business to the tune of millions of dollars and now steers clear of the process for companies it does not know.

Mr.Smith said: "I would argue that there is no one in Bermuda who has invested more in e-commerce for better or for worse. For better on what we are doing, and for worse on the things we did not succeed on."

Mr. Collins said that the bank was involved in two types of credit card e-commerce in the past, processing through FEDs (First E-commerce Data Services) and merchant acquiring through the bank. "We spent a lot of time and money investing in those businesses," said Mr. Collins. "I think one misconception that people might have is the risk associated with merchant acquiring.

"Just to give you an example, we do merchant acquiring for an Asian supermarket chain, let's say. If there are charge backs, where consumers buy things and they are not happy with the goods they get, the Asian supermarket chain is responsible for basically making them whole and paying them back. If that Asian supermarket chain goes bankrupt or is in a fraudulent situation, the merchant acquiring bank is responsible for paying those charge backs. So if we, or any bank or body, do those merchant acquiring for companies outside Bermuda, we are taking a clear, direct credit risk on every one of those companies. And our experience during those couple of years was pretty much 100 percent of those companies that were interested in our services were start-up companies with minimal capital and really weren't the type of companies that Bermuda is trying to attract."

He went on to say that the bank was now focusing on was "what we consider to be e-commerce" which is selling products and services and information online to consumers.

"Bermuda companies and consumers are benefiting from the investments we have made," he said.

He pointed to GlobalConnect on the corporate side, a real-time, straight-through processing that allows any company, both local and international to send a money transfer through without anybody touching it.

"That is a sea change from where Bermuda was four or five years ago. Now that product in itself if attracting Fortune 500, Fortune 1,000 companies to Bermuda and I would say we already have a relationship with a significant portion of Fortune 500 companies anyway and this sort of thing is what attracts those sort of companies," he said.

He said that EasyLink online had a similar capability to GlobalConnect, with straight through processing in real time and allows Bermuda consumers and residents to pay all their bills at any bank in Bermuda.

"From a personal perspective, the number of cheques I write has gone down dramatically and stamps and filling out envelopes and things.

Mr. Collins said: "I think we really are succeeding in e-commerce but it's really the types of things that companies and residents really want. Credit card processing and merchant acquiring is a very small niche portion of the e-commerce world and for some reason as a jurisdiction have started to focus on that niche as really e-commerce, when really we and Bermuda in general - I mean Butterfield has Butterfield Direct - have made huge strides with e-commerce. It is really the type of e-commerce that is benefiting consumers and attracting Fortune 500 companies. Credit card processing and merchant acquiring unfortunately from our perspective didn't achieve that.

"I would suggest you get paid approximately 10 percent of the type of return you should get relative to the risk you are taking.

"And the risk you are taking is enhanced because simply you don't really know the companies that you are taking credit risk on."