A powerful group of corporate investors led by J.P. Morgan & Co. have banded together to form a firm that will specialize in settling and processing business-to-business Internet payments.
The formation of Miradiant Global Network Inc. was announced Monday by its backers, who have put in $16.75 million so far. They include LabMorgan, the e-finance unit of J.P. Morgan; Lehman Brothers; MSD Capital, the private investment firm of the computer magnate Michael Dell; TL Ventures; and Impact Venture Partners.
The new entity, which is working out of LabMorgan's offices in New York, will introduce a service this fall to facilitate national and international business-to-business payments. The service will help buyers and sellers present and review invoices, and it will include an area for customers to dispute and discuss payments.
Miradiant will handle multicurrency payments and will aggregate and pool transactions to make more efficient use of the banking system, the firm said.
It will also work with buyers and suppliers to try to establish predictability and clarity in the payment process, which will help companies manage their working capital better, Miradiant said.
A more orderly online buying process will help companies use information about their accounts receivable and accounts payable to improve their trade and financing terms, Miradiant executives said.
Miradiant's competition would include a number of financial services companies that are working with Ariba Inc., a technology firm that provides the plumbing for B-to-B marketplaces. Ariba has signed up ABN Amro, U.S. Bancorp, FleetBoston Financial Corp., Bank of America Corp., and American Express Co., which aim to handle the transaction processing for these markets.
Another similar venture - called FinancialSettlementMatrix.com - was announced this month by Wells Fargo & Co., Citigroup Inc., and three technology firms.
FinancialSettlementMatrix and the Ariba alliances are aiming to team up with as many banking partners as possible to facilitate business-to-business payments and invoicing. Miradiant has not named its banking partners, but they "will be able to affect transactions globally," the company says.
Arthur Magnus, a managing director and co-head of the development group at LabMorgan, said payments and financial instruments "are the key linchpin that seems to be missing in business-to-business e-commerce today."
Mr. Magnus is a member of Miradiant's board of directors, as well as the U.S. national group steering committee of Swift, the Society for Worldwide Interbank Financial Telecommunication.
LabMorgan will "work with management to do a full review of all the risks that the company is taking to ensure they have strong controls in place," he said.
Miradiant was formed in part from a 10-year-old company called Eruca that was based in Brussels and run by Bernard de Groeve, who is now chief executive officer of the new firm. Eruca specialized in processing travel payments; it handled 300,000 transactions a year for 350 corporate clients.
Kermit Harvey, vice president of sales and business development for Miradiant, said those customers have migrated to the new company. Mr. Harvey used to be vice president of e-commerce outsourcing for Appnet.
Other senior managers at Miradiant include Kailash Khanna, the former chief technology officer for Swift; Christopher Hanan, the co-founder of E-Steel and a former consultant at Boston Consulting Group; Kevin Mellyn, a founding partner at the Mitchell Madison Group; and Candace Hanau, a former marketing executive for Deutsche Bank's global institutional services group.
As companies continue to try to solve the payment, integration, and presentment issues in online business-to-business transactions, "banks will continue to hedge their bets" and ally with multiple payment solutions, he said.
Gary Craft, a managing director at Deutsche Banc Alex. Brown, said there is plenty of room in the market for companies like Miradiant. These companies' services are in demand, and Miradiant has the advantage of big-name backing, he said. "Smart investors can help with branding and with the mind share a company can garner."
However, the real challenge in business-to-business invoice and payment settlement is integrating the billing information with the legacy files, he said. "The companies that have mastered integration have been in the business for 10 to 15 years."
The leaders in this area, Mr. Craft said, are Bottomline Technologies of Portsmouth, N.H., which has equipped more than 2,500 companies with payment capabilities, and 10-year-old Princeton eCom, which was one of the first companies to present a bill on the Internet.
"This market is coming together pretty nicely, and though there are a couple of trench players, there is plenty of room for others to come," he said. "But unless they offer an end-to-end solution, they will be inferior."