Wachovia Corp. will begin testing a business-to-business electronic marketplace with six of its corporate customers on Monday, even though officials of the company acknowledge that banks have not proven their staying power as hosts of such marketplaces.
Wachovia's workwares.com marketplace will let middle market customers buy and sell goods and services, such as janitorial services, office supplies, travel services, and entertainment. Credit cards will be the initial method of payment, with the capability for electronic invoicing as well as payments by automated clearing house and wire transfer following soon.
The $72 billion-asset bank expects to roll out the offering to 20,000 customers early in the first quarter but is not fully committed to that timetable.
"We are watching the marketplaces and seeing how well they are being adopted to decide whether to accelerate or slow down the product offering," said Joanna Giacobbe, manager of workwares.com for Wachovia.
Digital marketplaces are uncharted territory for banks, which are still searching for the appropriate role to play in this new setting. Some, like Wachovia, are seeking a central role in organizing marketplaces for their corporate customers, by providing a full range of deal negotiation and payment services.
Others, such as Citigroup Inc., are sticking more to the background by providing Internet payment services on already-formed marketplaces. Citi said this week, for example, that it would provide payment capabilities on Oracle Corp.'s OracleExchange service. The bank chose this strategy after it experimented in Asia with forming its own marketplaces.
Wachovia appears to still be deciding how to tackle the market. "We are focused on the evolution of marketplaces to help us to continue to get through what we call the proliferation phase," Ms. Giacobbe said.
The Winston-Salem, N.C.-based bank plans to develop payment and logistics capabilities on workwares.com that could be sold to other marketplaces, Ms. Giacobbe said. The bank already has received a few requests for such payment solutions, she said.
Other banks are pursuing a similar two-pronged strategy. Bank of America Corp. last month began a pilot test of its Banc of America Marketplace LLC for its corporate customers, and also is developing services it can sell to other marketplaces. In August the Charlotte, N.C., bank announced a partnership with ABN Amro, U.S. Bancorp, and FleetBoston Financial Corp. to offer payment services to digital marketplaces sponsored by Ariba Inc.
Wachovia plans to hold extensive talks with its corporate customers to better understand how the market will develop. "Our sales cycles will be about getting in and talking to companies about how to reduce overhead, gain efficiency, and integrating buyers, sellers, and account receivables," Ms. Giacobbe said.
Bank-owned marketplaces "are a good testing ground for building the financial service piece," said Avivah Litan, senior analyst at GartnerGroup of Stamford, Conn. But "banks don't have vertical expertise and unless they have the expertise, they are not going to last," she said.
Observation and experimentation may prove to be a wise strategy. "It is right to invest some resources in sponsoring or assisting in exchanges," said Diogo Teixeira, president of TowerGroup. Banks should "view it as a portfolio of efforts and expect some of them to fail."