August 14, 2000

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Banks Team To Offer Services For Online Exchanges

Financial marketplaces offer participants credit-card, escrow, and foreign-exchange services

By Cheryl Rosen

More on e-payments:

sidebar: Marketplace Creates Its Own Solution For Online Payments Major E-Payment Initiatives Combat Online Fraud (7/24/00) GE Expands Online Payment System As Service (7/17/00)

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usiness-to-business exchanges soon can offer members full-fledged financial services as new marketplaces emerge to link exchanges with banks. Two banking powerhouses last week unveiled the first such site, and others are in the works.

Citigroup in New York and Wells Fargo in San Francisco joined Enron Broadband Services, i2 Technologies, and S1 to develop FinancialSettlementMatrix.com. The site promises a one-stop shop for any online exchange to offer participants credit-card services, electronic checks, escrow services, letters of credit, buyer qualification, and foreign-exchange services, says Rex Shelby, Enron Broadband's managing director.

Testing is slated to start later this year, followed by a first-quarter 2001 launch using S1's online payments engine and i2's TradeMatrix platform (see story, "I2 Casts Wider Net Over Online Marketplaces"). "The large public exchanges are in their infancy, but they'll be getting off the ground in the next six to 12 months, and it will be absolutely a requirement to have a set of financial services," says Pat Toole, IBM's general manager of business-to-business solutions. The first three or four to get there will own the market, Toole says.

While the FinancialSettlementMatrix.com partners scurry to get their marketplace up and running, two other groups of unnamed banks, one from the East Coast and another from Europe, are peddling their wares to exchanges, sources at several exchanges say. And some exchanges are creating their own divisions to offer financial services (see sidebar story, "Marketplace Creates Its Own Solution For Online Payments ").

Many exchanges say the need for global financial services is growing.

E-Steel, for example, has a base of customers that already know and do business with one another. "The highest value lies in bringing together known buyers and sellers and improving the business process," says Sherry Sigler, senior director. "But when we're ready to find new customers, financial services will be an important option."

By that time, there may be several choices. "We recognize that there will be a wide variety of marketplaces, that it's not 'one player takes all,'" says Ann Cairns, global E-solutions head for Citigroup's eBusiness. "We're saying, 'Let's create true market reach; let's create strong alliances and move our content onto the Net using as many different mechanisms as we can.'"

That's a good plan, says Ariba Inc.'s director of financial services, Randy Joss: "A lot of forward-thinking financial institutions realize that an Internet-centric platform can be shared, and they're looking to share resources to build it out. We're working with everybody."

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