Citigroup Inc., which has elected to remain in the background in business-to-business Web marketplaces, will offer payment and settlement services to users of Oracle Corp.'s OracleExchange.com.
The strategy at some other big banks is to form marketplaces - usually for corporate customers - that provide a full range of deal negotiating services in addition to payment capabilities. But Citi says it has decided to draw on its core strengths instead.
Under a deal announced Tuesday, Citigroup will provide financial services through its CitiConnect engine to the more than 3,000 registered businesses on OracleExchange.com by the second quarter.
Citigroup also will use Oracle's Internet procurement services. Citi spends $5 billion on supplies each year, vice chairman Deryck Maugh said at a luncheon Tuesday.
In 1998, Citigroup dabbled in creating and hosting an online business-to-business marketplace in Asia. "But once people started coming up with exchange technology, we saw that it made sense to partner with a technology company that could bring all of their resources to host the marketplaces, and for us to provide the financial services," said Ann Cairns, head of global e-solutions for Citibank ebusiness.
Though the $451 billion-asset banking company has a license to operate a marketplace with Commerce One in Latin America, in most cases it stays in the background, providing payment services. Citi is the default financial services provider on Commerce One's buy-side marketplace.
Citi also offers financial services to business customers on SAP AG marketplaces, as well as to Marrakech, a marketplace with operations in Latin America, Ms. Cairns said.
In August, Citigroup teamed up with Wells Fargo & Co., Enron Broadband Services, i2 Technologies Inc., and S1 Corp. to form FinancialSettlementMatrix.com, a comprehensive effort to bring payment capabilities to digital marketplaces. FinancialSettlementMatrix.com, which is expected to be operational by the first of the year, is in discussions with three pilot customers and has integrated Citigroup and Wells Fargo payment capabilities.
"There will be marketplaces where you have diverse buyers and sellers, which have a number of banks to manage risk and provide liquidity, where FinancialSettlementMatrix plays an integral role," Ms. Cairns said.
CitiConnect will be more relevant in seller-centered private marketplaces "where big companies want to use a major global bank to have a one-stop-shopping opportunity," Ms. Cairns said.
Diego Teixeira, president of TowerGroup, said, "A business-to-business exchange is a type of commerce where corporations are offering bids for products and services and closing those transactions, and these are functions that banks haven't done."
Banks "don't enable commerce, they enable transactions," Mr. Teixeira said. "Smart players, like Citigroup, won't imagine that they can revolutionize the way business is conducted just because they are doing business on the Internet."
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