A handful of banks are introducing or planning procurement hubs in order to keep financial clients from bolting to tech vendors for their e-buying needs. A new report says that while banks' procurement sites are improving, more e-payment and security options are needed.
The report, "B-to-B: Where's the Payment?," was released earlier this month by Meridien Research, a Newton, Mass., financial Internet consultancy. It says banks must use their incumbent financial strengths if they are to beat out tech vendors in the e-procurement arena.
"Financial institutions are best suited to bring value-added services, such as identity verification, credit authorization and financial services, for business-to-business commerce, including e-procurement," said Elizabeth Achorn, a Meridien analyst and the report's author.
The report is one of the first to suggest that banks are doing a passing job in the Web space. Still, Meridien says banks need to continue partnering with technology companies, rather than going it alone, if they want to keep competing cost-effectively.
Most banks entering e-procurement are doing so with the aid of technology companies such as Intelysis Electronic Commerce and Clarus Corp. Partnering makes strategic sense because it allows banks to concentrate on what they do best: providing financial know-how, instead of trying to be Internet mavens, Achorn said. She cited several banks examined in the report, including Wachovia Corp. and Deutsche Bank AG, as being especially good at partnering.
Wachovia, which plans to launch an e-procurement hub by the first quarter of 2001, is getting help from Clarus, an Atlanta-based b-to-b software provider. The as-yet-unnamed exchange will allow Wachovia's business clients to buy direct and indirect goods, said Joanna Giacobbe, senior VP and manager of Wachovia's eMarketplace.
Partnering with Clarus frees up Winston-Salem, N.C.-based Wachovia's bankers to focus on marketing and e-financing, instead of dealing with building a Web site, Giacobbe said. "Clarus brought us the understanding of the nitty-gritty processes of procurement. This way, we can do what we'd rather focus on: customer service and marketing," she said.
The exchange will allow Wachovia to market financial products after it has attracted users with the e-procurement services, Giacobbe said.
Meridien's report chides banks for not offering e-procurement payment options beyond credit cards. Other, more creative choices--short-term leasing, for example--are needed, Achorn said.
Business owners, some of whom are cash poor and spooked by credit cards' high interest rates, are reluctant to pay for, say, a $150,000 server on their MasterCard. "Businesses hate buying capital equipment on a credit card," said Ivan Wolkind, CEO of eLease, an Internet lending company (see story below).
Some banks, Wachovia for one, are planning non-credit card e-payments. By next year, the bank, which has $69 billion under management, will introduce payment options such as lines of credit and wire transfers, Giacobbe said.
Security, meanwhile, is another sore point, Achorn said. "Most banks offer 128-bit encryption. This is very strong, but in my opinion, not enough," she said. She suggested banks begin offering digital certificates, noting the e-signature legislation recently signed into law by President Clinton.