X.com is seeking to make its PayPal electronic payment service as common for business-to-business payments as it is for person-to-person payments.

In the first of six such agreements expected by yearend, the Palo Alto, Calif., company announced Monday that it would supply payment capabilities to BuyLink Corp., an online marketplace for retailers and manufacturers. The San Francisco company's 8,300 retailers and 3,000 manufacturers will be able to use PayPal to execute near-immediate fund transfers starting this month.

The move into higher-value transactions is a bold one for X.com, which has been criticized in the past for not providing adequate protections against fraud. It also pits the Internet financial services provider, which is still awaiting approval for a bank charter, against large cash management banks that cater to the payment needs of corporations.

X.com, which expects to become profitable in 2002, has even greater growth in mind. A government-to-business payments capability will be available in the fourth quarter, and an international venture will be announced next month, said Elon Musk, the founder and chief executive officer.

Through a recent agreement with Logica, X.com also plans to introduce wireless payments, initially in Japan and Europe.

"We want to be in all aspects of payments," Mr. Musk said.

In only eight months X.com has become a powerhouse in person-to-person payments. Last Friday it surpassed the 3 million-account mark, putting it far beyond the reach of its closest competitors. ProPay of Orem, Utah, introduced in May, has 100,000 accounts. BillPoint, a joint venture of Wells Fargo & Co. and the online auctioneer eBay that addresses only payments executed at auctions, would not reveal its number of accounts.

X.com earns revenue from interest earned on money held in its accounts and from the 1.9% transaction fee businesses pay to receive payments. Its international service would add revenue through transaction fees on international payments. Fees would also come from the interchange the firm would collect when it introduces credit and debit cards that can be used offline.

Having raised $146 million of venture capital as of April, X.com already has shown an ability to grow in other markets besides person-to-person. Some 90,000 businesses signed up for a consumer-to-business Internet payment service it introduced in June. The service, which works just as the person-to-person option, requires consumers and merchants to open an X.com account.

In the business-to-business market, the firm plans to work its way up to targeting larger companies. "We see the most demand for this coming from the smaller businesses," Mr. Musk said. "Smaller businesses tend to be a bit more agile and are a little quicker to adapt to change. It's going to take a little bit longer for the larger ones to change the way they do business."

Its marketing efforts to larger companies will pick up over the next 60 to 90 days, he said. The firm already has relationships with several large businesses through mass payment deals, in which companies use PayPal to pay employees sales commissions or salaries.

To appeal to larger businesses, X.com plans to lift a $10,000 transaction limit next month. Mr. Musk said the limit is no longer necessary now that the company has refined its ability to track larger payments. The firm also is working on improving PayPal's ability to interface with accounting systems used by large businesses.

X.com's biggest competition in the business-to-business arena may be FinancialSettlementMatrix.com, a joint effort announced on Monday involving Wells Fargo, Citigroup, and three technology firms. The new company plans to offer the full gamut of payment options.

"We do not view ourselves competitive with that," Mr. Musk said. "We talk to them all the time, and we would be happy to join with any of the other consortiums that are put together."

James Van Dyke, an analyst with Jupiter Communications of New York, said X.com's entry into the business-to-business market is a move into the territory of wholesale banks.

"Lockbox is really virtual banking functionality that existed before the Internet," he said. "With X.com getting into this business, it is going to be a foot race [to see] who earns the trust of the business customer."

PayPal requires users to open X.com accounts by making a credit card advance or debiting the money from their bank account. Unlike credit cards, the service until recently did not offer recourse for consumers who buy products but never receive them.

X.com took measures earlier this month to stem criticism that its buyers are not protected from fraudulent merchants. It instituted a new policy in which it will pay consumers who dispute transactions involving vendors that been authenticated by the company.

"We guarantee payments between verified businesses," Mr. Musk said. "But if you are not verified, you are at your own risk."

In addition, users are required to prove that they have an account in good standing at another financial institution. Buyers can check sellers using a member-information link, and receive a warning when they are about the send a payment to an unverified user.

James B. Shanahan, a partner in the Newark, Del., office of Business Dynamics Consulting, said that merchants may be "wary" about the potential for fraud, but will most likely embrace online payments anyway, because transactions are executed almost immediately.

"Right now, it's like going from the 21st century to the 19th century," he said. "It's silly to go from shopping on an online marketplace to an invoice that takes a month at least to get paid."


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