March 13, 2000 4:05 PM PST
AmEx, Ariba unveil marketplace payment plan
As previously reported, American Express, an issuer of corporate credit cards, and Net software firm Ariba will develop an online payment processing system for the growing number of business exchanges on the Internet.
Separately today, Ariba announced it is teaming with PC maker Dell Computer to create a broad business-to-business e-commerce alliance aimed at helping customers cut costs. Dell's new marketplace, running on Ariba's eCommerce platform, will offer small to midsize businesses an easier way to buy supplies online.
While marketplaces that connect suppliers and customers have given birth to a new way of doing business online, the processing of payments is still deeply rooted offline. Firms have to wait while purchase orders are verified, approved and processed before a transaction is completed--slowing the entire transaction.
The alliance between American Express and Ariba is intended to allow companies to make payments online, cutting through bureaucratic red tape and other obstacles.
"Our two companies will make it easier for mutual customers to rapidly participate in and benefit from the new (business-to-business) economy," Ariba president Larry Mueller said in a statement.
The number of online marketplaces is growing daily. Recently, traditional manufacturing and retail firms such as General Motors, Ford Motor, Toyota Motor and Sears Roebuck have jumped onto the Web to simplify procurement and corporate purchasing.
Winning just a sliver of the transaction fees involved in business-to-business payments is likely to be a big boom for American Express. The leading research firms expect the market to be worth between $2.7 trillion and $7.3 trillion by 2004, up from just $131 billion in 1999.
Previously, the credit card giant teamed with Ariba, Commerce One, Clarus and other services firms in an attempt to improve communications between marketplaces. American Express itself said last November it would develop an exchange to bring suppliers together to simplify the corporate purchasing process.
Last Wednesday, American Express Corporate Services president Ed Gilligan hinted at the company's intentions, saying that "no purchase is truly an online transaction unless payment takes place online as well."
"Without integrated online payment solutions, the explosive growth in business-to-business e-commerce will be hampered," Gilligan added, while commenting on the newly forged alliance between Ariba, i2 Technologies and IBM.
"We are linking our global payment network with the Ariba network to facilitate payments of all kinds."
The rapid rise and popularity of the sector has obscured some of the challenges the industry faces, however. Some businesses have voiced concerns about the potential need for government regulation over marketplaces that concentrate tremendous purchasing clout among a handful of large companies, opening the possibility of collusion.
Others have noted that despite the tremendous attention the area is receiving from investors, security issues and technology standards to improve cooperation between marketplaces need to be addressed if the sector is to continue its rapid growth.