August 3, 2000 12:25 PM PDT

American Express forms new B2B payment company

American Express has created a new company as part of its push to become the leading electronic payment services carrier in the business-to-business market.

The credit card issuer today said it is teaming with business-to-business marketplace developer Ventro to launch the new venture, which will let companies buy office products, industrial supplies, computers and business services from suppliers.

Dubbed MarketMile, the new company combines American Express' B2B Commerce Network, which offers companies online payment methods, supplier services and content management services, with Ventro's marketplace building software and services.

"A number of companies, particularly in the telecom and utility sectors, are looking for something different from the typical exchanges, like your auto exchange," said Lisa Williams, an analyst at The Yankee Group.

Instead of exchanges that focus on a specific, narrow market, Williams said, companies "want an open exchange that provides business-to-business services to the small- and medium-sized company and are wrapped around a core service, like financial services. This deal offers that."

Williams said the company is trying to corner the general business products and services market worldwide, which is estimated at more than $1.4 trillion. The new company will initially target midsized companies, with plans to eventually extend its services to large and small businesses.

Under the terms of the deal, American Express will initially have 65 percent ownership in MarketMile, and Ventro will hold a 35 percent stake, with plans to invite future participants and service providers to become stakeholders, the companies said.

MarketMile will use Ariba technology to run the marketplace, as well as technology and services that American Express has developed with Ariba. Ventro licenses Ariba technology as a major component of its business-to-business suite for all of its marketplaces.

Although marketplaces that connect suppliers and customers have spawned a new way of doing business online, the processing of payments is still deeply rooted offline. Companies have had to wait while purchase orders are verified, approved and processed before a transaction is completed, which slows the entire transaction.

MarketMile will be Ventro's sixth operating company, and it will be American Express' first separate e-commerce start-up, the companies said.

The new company is expected to begin handling live transactions in the first quarter of 2001. Its headquarters will be in Mountain View, Calif.

 

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