Startup Targets Electronic Payments Process

PORTLAND, MAINE (06/21/2000) - A Maine startup is trying to unravel one of the toughest knots in doing business over the Web - actually paying another company for goods and services.

Clareon Corp. has created a Web service that fits between enterprise applications, such as accounts payable programs, and existing payment systems, such as the Automated Clearing House (ACH), which is widely used by banks to clear checks.

"Today, electronic commerce means the front process is electronic up to the moment when you push the 'buy' button," says Kate Barrand, chief marketing officer for Clareon. "Payments then go offline. Typically, you have a paper check going out the back end [of the payment process]."

The company, spun off by FleetBoston Financial and funded with US$15 million from various partners, is jockeying to be the middleman that makes fully electronic payments possible between companies. Its service is based on software technology originally developed by an industry group called the Financial Services Technology Consortium.

A company signs up for Clareon's service and downloads a small browser plug-in that digitally signs and encrypts file output from the company's accounts payable program. Via a Secure Sockets Layer connection, the files are passed to Clareon's server program for processing. The information is decrypted, then Clareon inserts a payment authorization and hands it to the ACH for final settlement by the banks, which debit one account and credit another to settle the transaction.

Finally, Clareon feeds relevant data, in the appropriate formats, back to enterprise applications, such as Oracle Financials or SAP R/3, of the company making a payment and the company receiving it.

Clareon will offer its payment service in two ways:

The service will be available to a slew of new Internet business exchanges because they typically lack this fundamental capability.

Clareon participants can also use the service to make and accept payments with each other directly, without using an exchange in the middle.

According to Barrand, industry studies put the cost of writing checks at $1.50 to $2 apiece. For businesses that write thousands of checks every month, those costs add up. Accepting paper checks and processing them adds still more costs.

Clareon charges companies receiving payments 50 cents per transaction, plus a monthly subscription fee of $30. According to Barrand, both are below what companies must pay today for payment processing and bank services such as lock boxes.

Banks will take over some of these services, but only by creating one-on-one relationships with companies that are customers, Barrand says.

"But with us, you sign up once and can send and receive payments with anyone else in the Clareon network," she says.

Clareon made its first payments in mid-May, and is seeking new customers to register at its site. The company is bringing out a software upgrade July 15 with the full and final Web interface for its customers.


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