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April 3, 2000

Credit-Card Companies Experiment With Marketplaces
American Express, Visa, and Mastercard plan enhanced services to fend off new rivals

By Matthew G. Nelson with Jennifer Mateyaschuk

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nline marketplaces are changing the way businesses buy goods. Major credit-card companies hope to do the same for the way businesses pay for those purchases.

American Express, MasterCard, and Visa plan to offer enhanced payment services to business-to-business marketplaces, including more-detailed reporting of transactions on a global basis, the ability to handle international currencies, and, in some cases, lower fees for larger transactions.

The companies are also experimenting with operating online marketplaces. MasterCard, in Purchase, N.Y., this week will begin testing one on its Web site that will let small businesses buy and sell goods and services. "The whole point of the test is to understand the behavior, needs, and wants of the small-business community," says Steve Abrams, senior VP for corporate payment solutions. MasterCard also is cutting its fee for transactions larger than $4,500 from 1.75% to as little as 0.85%.

American Express is working with marketplace infrastructure provider Ariba Inc. to create a small-business exchange. This week, American Express will reveal that it's partnering with OutPurchase.com Inc., which provides an outsourced procurement service to small and midsize business. "It's about piecing together these previously separated components to provide a complete purchasing and marketing solution," says Jim Stovell, CEO of OutPurchase.com, in Palo Alto, Calif.

American Express is also developing a suite of online payment applications that have purchasing card functionality, but will also be able to move money between the checking accounts of buyers and suppliers, says Ed Gilligan, president of American Express Corporate Services. Smaller companies "don't always want to pay with their credit account--they want to take leases, they want lines of credit, they want trade lines," he says. "We'll bundle all this and offer it as an embedded suite of products."

MasterCard is also testing a service called the Commercial Card Gateway to provide companies with more details on purchases. "It enables us to extract all the nonfinancial line-item detail from E-procurement systems," says Abrams. "Then we have the ability to push that data back out to the companies in whatever format they choose."

The credit-card companies are facing many new rivals. Ecredit.com Inc., for example, will automate a buyer's credit approval and provide a host of financing options from multiple financial lenders, including Associates Commerce Solutions, Finantra Capital, Fleet Financial Group, and Mellon Leasing.

"Payments is one of the unsolved pieces. Most people that buy stuff are using purchasing orders, and it's a question of how that will get online," says Tim Clarke, VP of advisory services for research firm NetMarketMakers. "I think the credit-card companies see this as an opportunity for their procurement cards. They haven't had a lot of use so far."

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