FRAMINGHAM (04/10/2000) - The largest bank in the U.S., Bank of America Corp., has joined forces with Ariba Inc. in Mountain View, California, to create a business-to-business online marketplace that could be involved with as many as one quarter of all business payments in the country.
Officials from both companies announced last week that they expect the new marketplace to serve Bank of America's 2 million business customers. To administer the marketplace, Bank of America will form a new subsidiary, Banc of America Marketplace LLC.
The Charlotte, North Carolina-based bank is currently involved with about a quarter of all payments made in the U.S., according to George Bicher, an analyst at Deutsche Banc Alex. Brown Inc. in Baltimore.
"That fact, together with the fact that they have one of the largest corporate relationship lists in the country, provides a lot of the flow around which a business-to-business enterprise can be crafted," he said.
Jim Dickson, head of BankofAmerica.com, said the exchange will target the bank's 1.6 million small-business customers in key vertical markets such as retailing when it launches in about 18 months.
"We'll go market by market and create vertical marketplaces," Dickson said, adding that vertical integration would make the marketplaces more compelling for small businesses and other clients.
"This has a potential for phenomenal growth," said Kenneth D. Lewis, president and chief operating officer of Bank of America.
"Business customers will have access to faster, easier and more efficient ways to buy and sell goods over the Internet," Lewis said. "Our customers will be able to automate the procurement process. And it gives minority suppliers broader access to markets."
New Revenue Opportunities
Lewis wouldn't say how much the project is expected to cost or earn the company, but he did say the online marketplace gives the bank additional revenue capabilities.
He said customers would do more of their financial business with the bank, and the bank would gain from the efficiencies of customers being online.
The bank might also expand its business relationships down the supply chain, said Deutsche Banc Alex. Brown's Bicher.
Bicher wouldn't speculate about whether the new alliance would stifle competition between business-to-business exchanges, but he did point out that it puts additional pressure on traditional middlemen.
"You basically have end users going directly to suppliers," Bicher said. "You have a more efficient way of communicating."