In a move that seems to cast further doubt on whether banks should act as Internet dealmakers for large corporations, J.P. Morgan Chase & Co. has pulled the plug on an ambitious business-to-business electronic marketplace announced just over a year ago with Deloitte Consulting LLC.
The Chase-Deloitte venture, announced with much fanfare last February, was to offer money-saving procurement services to communities of large corporate buyers. But the unnamed service barely got out of the idea stage. By mid-2000 apparently well before Chase Manhattan Corp.s Sept. 13 merger announcement with J.P. Morgan Chase had decided the project was too costly and would not achieve the desired returns, said Ray Fattell, senior vice president of LabMorgan, an e-commerce subsidiary of Morgan Chase. 
Mr. Fattell addressed the fate of the Deloitte marketplace after discussing bPurchase, the banks latest plan to target business transactions on the Internet. Up and running since the end of January, the marketplace aims to help small and midsize businesses shop for and order supplies.
bPurchase is a much more straightforward approach, said a bank spokeswoman.
The service is powered by Metiom Inc., a New York company formerly called Intelysis, in which the bank has an approximate one-third stake.
Morgan Chases change of plans comes to light amidst increasing uneasiness about the risks and rewards of business-to-business electronic commerce, a once-heralded corner of the new economy. A year after Chase and other big banks announced they would build electronic marketplaces to extend their corporate cash management businesses, demand for such services remains tepid and actual traffic low.
Ninety-two percent of nearly 400 purchasing managers surveyed by the National Association of Purchasing Management and Forrester Research said in a report published last month that the Internet had produced no changes or only minor ones in the way they buy products.
Providers of business-to-business marketplaces nonetheless plan to continue pouring money into their efforts. Jupiter Research, a division of Jupiter Media Metrix, last month projected that technology spending on marketplaces would increase from $2.1 billion in 2000 to nearly $81 billion in 2005.
Though some banks such as Hibernia National are sitting out the spending wave, plenty of others are on board. Wells Fargo & Co. and Citigroup Inc. are moving ahead with an initiative announced in August to build FinancialSettlementMatrix, a payment and invoicing company that can plug into a variety of marketplaces.
And Bank of America Corp. has already introduced Banc of America Marketplace LLC, a service announced in April to help its business customers buy and sell goods over the Internet. The marketplace, now serving middle-Atlantic customers, is alive and doing well, said a spokesman for Bank of America.
Morgan Chase is far from abandoning B-to-B electronic commerce. Besides bPurchase, it also is a partial owner of Miriadiant Global Network Inc., a company formed in part by LabMorgan in August to facilitate business-to-business payments.
But industry analysts generally applauded the banks decision to fold its partnership with Deloitte, concurring that the costs and risks associated with bank-sponsored marketplaces serving a variety of industries far outweigh possible returns.
I just dont see any advantage a bank can bring to these marketplaces, said Rajeev Agarwal, director of commercial banking practices at TowerGroup. There is a saturation of marketplaces out there and the percentage of transactions going through them remains really low.
Eric J. Rajendra, a vice president at the New York consulting firm A.T. Kearney, said banks should keep their marketplace efforts very focused. They should only sponsor a marketplace if they have expertise in a given industry, advanced information technology capabilities, and if they count the majority of companies in a given industry among their clients. If not, then instead of building a marketplace they should work to plug into others, he said.
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