EBay, Wells Fargo Team on Credit Transactions

FRAMINGHAM (03/02/2000) - EBay Inc. and Wells Fargo & Co. yesterday launched a joint venture to process person-to-person credit-card payments on the Web auction site.

The new company, Billpoint Inc., will speed up the sometimes-lengthy transaction process between individuals who buy and sell at eBay's auction site, but company officials said they also plan to take the new payment platform into other e-commerce arenas.

Billpoint allows buyers on eBay's site to enter their credit-card information to make purchases. When a transaction occurs, Billpoint deducts the payment amount from the buyer's card and electronically credits the seller's checking account, without letting either person see the other's account information.

"This offers a whole new class of payments online," said analyst Tom Murphy, vice president at Global Concepts, an Atlanta-based payment systems consulting firm. "Person-to-person payments are a whole area that no one can get to. . . .

People have shown they'd rather use a credit card than a check."

EBay officials hope the new platform will be more popular than the current payment method used by its 10 million registered users. Now, after an auction is completed, the seller tells the winning bidder where to send a check, then waits for payment before delivering the item.

According to eBay president and chief executive officer Meg Whitman, users of Billpoint don't need any new hardware or software, and 80 percent of those who register for the service need no help getting started.

"The early results from our tests have been strong, and we expect the buyers and sellers to move to Billpoint," Whitman said in a conference call announcing the launch this morning.

EBay and Wells Fargo officials said the teaming up of the nation's seventh-largest bank and the Web auction giant will provide users of Billpoint with added security by removing much of the uncertainty between buyers and sellers who don't know each other.

"We believe that we are the first to address the person-to-person payment space," said Michelle Bonaugh, senior vice president of e-commerce at Wells Fargo, which purchased a 35 percent stake in Billpoint from eBay.

Officials at all three companies said they hope to expand Billpoint to other areas of e-commerce, such as the person-to-small-business field.

Billpoint, bought by eBay in May, will offer its services for free until May 31. After that, transaction fees of 3.5 percent, or 35 cents for sales under $10, will be charged to the seller. If sellers balk at the fees, that could slow - or even stall - Billpoint's growth.

"(Billpoint's) sustainability as a model is not clear until we see alternatives fleshed out or the pricing," said Patricia McGinnis, managing director at Cambridge, Mass.-based Mainspring.

McGinnis pointed to alternatives such as so-called smart cards, which have built-in computer chips for added security, and debit cards that use personal identification numbers on CD-ROM.

"What Wells and eBay are doing is unique," McGinnis said. "But are sellers going to continue to absorb the fees?"

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