IBM Corp. is putting feet on the street to sell the notion of payment settlement.
The Armonk, N.Y.-based computer hardware, software and consulting giant has agreed to market, sell and install settlement systems from SurePay Inc., a b-to-b payment company backed by Goldman, Sachs & Co. and First Data Corp.
The move is significant because settlement is one of the least developed areas of b-to-b transactions, said Mark Greene, IBM general manager-banking.
Though companies can purchase over the Internet and even link their supply chains to automatically boost production based on demand, payment transfers are often relegated to paper-based processes that are costly and inefficient, Greene said.
"We think settlement is incredibly important, especially in the e-market arena and in direct corp-orate work,’’ Greene said. "A number of markets are often left wondering what happens when it comes to the payment part of a transaction.’’
Development of systems for automating scheduled payments is critical for ongoing sales and marketing efforts on the Internet, said Jim Flynn, COO of Pitney Bowes Docsense, Danbury, Conn.
Sales organizations can’t account for a Web sale until payment is cleared, and marketing departments have a hard time justifying expenditures until a deal is done, Flynn said. Pitney Bowes Docsense provides integrated document delivery systems online for such customers as Siemens AG and the United Kingdom Postal Service.
"Internet settlement is a lot like putting lipstick on a dog,’’ Flynn said. "There’s been a lot of activity in billing and settlement, but there’s no real point if you’re just glossing over paper-based processes.’’
Others joining the race
In IBM, SurePay gains a partner with deep ties to corporate customers and banks. Yet it is not the only venture focusing on transaction settlement. Such companies as Clareon Corp., Bottomline Technologies Inc., BillingZone L.L.C. and Checkfree Corp. are also racing to gain share in the b-to-b payment market.
Few companies will quote prices, but set-up fees for these types of services can easily run $35,000 to $100,000, and transaction fees are often a minimum of $1.50 per transaction. SurePay would not comment on its fees.
What’s different about b-to-b settlement? Unlike consumer transactions, which are largely conducted in real-time via credit card, b-to-b settlement involves scheduled payments, escrow, bank transfers and, increasingly, currency conversion.
"The problem is financial savings earmarked for supply chain investments are not being fully realized through current settlement processes,’’ said Stephen Flett, CEO of SurePay. "A lot of money today is spent in supporting the delivery of invoices, processing of invoices and reconciliation of payment. We’re looking to close that gap."
Indeed, more than 70% of b-to-b transactions today are administrated via paper with the rest restricted to electronic data interchange and low-dollar corporate credit card transactions, said Aaron McPherson, research manager for the online financial services group at International Data Corp., Framingham, Mass.
In coming months, the IBM-SurePay mission will be to gain widespread support from banks that can guarantee b-to-b transactions and to sell companies on the value of digital certificate systems necessary to authenticate trading partners, he said.
"As one of the leading system integrators, IBM presumably can effectively push the notion of b-to-b settlement,’’ McPherson said. "The big question is whether they can bring together a lot of pieces necessary to make these systems work.’’