CHICAGO - MasterCard International plans to use its alliance with TradeCard Inc. to introduce an online business-to-business payment service that will offer a lower-than-usual interchange rate.

Ruth Ann Marshall, president of the North American region for MasterCard International, said business customers have been asking bankers for a way to make purchases online without paying 2% to 3% interchange rates.

TradeCard, a New York company that provides an infrastructure for online B-to-B transactions, charges a flat fee that is lower than normal interchange, but companies must make "big-ticket commercial deals" to qualify for the low rate, Ms. Marshall said. That policy will also apply to the new payment service, she said.

In an interview at the American Banker/RMA Small Business Banking Conference here Friday, Ms. Marshall said MasterCard and TradeCard will run a pilot program for the service this quarter.

Participants will be able to use the service to buy supplies and services through domestic and international companies, as well as retrieve transaction records.

The deal with TradeCard is meant to convert some of the purchases historically done with checks to card payments, she said. By using a card instead of a check, the companies will be better able to track their purchase orders and pay for them when contract terms have been satisfied, she said.

In a speech at the conference, Ms. Marshall said banks must do a better job serving small companies, even if it means offering products from other companies. "There is a growing difference between what small business needs and what banks offer."

She cited the sector's contribution to the economy, noting that most of the country's job growth in the 1990s was in companies with fewer than 500 employees. Employment at the Fortune 500 companies, meanwhile, has risen only 1.6% a year the last 20 years.

The Internet has made it easier to shop around for financial services, so banks have to give people a reason to use bank Web sites, she said. That could mean turning to a practice Ms. Marshall calls open finance - opening up the site to companies with complementary, or even competing, services.

At least one major bank plans to begin offering a nonbank's services at its Web site, she said.

Stock brokerages and insurance companies have already built online systems, and usually there is no need to duplicate their efforts, she said. "Customers want to deal with all their financial business at one site. You could spend years doing it yourself, but why?"

Getting customers to conduct transactions online will save banks money, Ms. Marshall said. Only 12% of banks offer online transactions, yet banks save more than a dollar on every transaction conducted through the Internet instead of a branch, she said.

Ms. Marshall cited a Merrill Lynch report that said the typical transaction costs $1.07 to complete at a branch, 50 cents over the telephone, and 1 cent through the Internet.

Stock trades could be an additional source of revenue for banks that partner with brokerages to offer the service at a bank site, she said.

Online bill payment can save banks money. Processing an electronic payment costs banks 35 to 50 cents, versus 50 cents to $2 for checks that arrive through the mail, Ms. Marshall said.

Only 2% of consumers pay bills online, but another 43% would consider doing so, she said. "The processor opportunity is huge."

In an interview, Ms. Marshall said Internet issues are important to small bankers.

"It is new and not well understood," she said. "The threat of disintermediation could be threatening to banks" as nontraditional payment providers such as telephone companies begin offering mobile payment options.

Aside from the Internet, mergers, acquisitions, and the cost of doing business are issues of concern for bankers, Ms. Marshall said.

Bankers "are much more opportunistic" than in years past, she said. "They want to talk about mobile commerce, business-to-business, the Internet, and what we can do with sponsorships and branding. There is a gleam in the eye."

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