Liablity issue prompts bank go-slow on e-commerce

UK banks stand accused of hindering development of e-commerce and until transaction liability can be decided they will not...

UK banks stand accused of hindering development of e-commerce and until transaction liability can be decided they will not encourage online trade. But is that the only hold up?

Companies that want to sell products on their Web sites should expect to receive the full support of their bank. Or so you would have thought.

According to the Institute of Directors (IoD), which this week released a survey of how its members were addressing issues of e-commerce and e-business, only 35% of respondents with Web sites allowed customers to place orders online.

A case of companies still being way behind the e-commerce curve, you might think. Apparently not.

Unfortunately, there is still no clarity over the issue of liability in any transaction made over the Internet, and whether it resides with the customer, the supplier or the credit card company.

Banks have been reluctant to set up facilities for suppliers to receive payment through Web sites until this position is clarified. According to the IoD this is proving to be a major impediment to the development of e-commerce in the UK, while the US is forging ahead.

The IoD says it has been pressing for action. You may ask, "So who's going to take this 'action'?" Is it going to be the Government, the Financial Services Association, the British Bankers Association, the credit card companies, the Association for Payment and Clearing Services - or all of them? How long does it take to make a decision? How much longer must we wait?

Contrast that with the billions of dollars being put into an inter-bank trust scheme called Identrus which a group of the leading financial institutions are putting in place for business-to-business e-commerce. Admittedly, just getting the e-business rules in place to facilitate these transactions has taken time, but if the banks can collaborate to create a mechanism to facilitate trust, why not try and help the smaller guys too to set up credit card payments? You cannot imagine such a lax situation applying in the US.

True to form, one of the largest US banks, Chase Manhattan, this week announced it was teaming up with Deloitte Consulting to form a new company to target the online procurement market.

The new company will offer to set up and manage Internet-based procurement systems for Fortune 1000 companies which spend an estimated $3 trillion annually in business-to-business procurement, which is perhaps the hottest sector in e-business at the moment. Chase and Deloitte expect to cut annual purchasing costs by an average of $200m to $350m for each client, by aggregating their spending to get better volume discounts.

The same principle has already been used by Ford and Oracle to drive huge cost benefits.

The new venture will take over the procurement activities of both companies, which total $8bn a year. By 2001, the companies expect the venture to be managing $150bn worth of annual purchases. Meanwhile, back in the UK, the government and financial services should by then be getting to grips with the credit card processing problem.

Reuters is another big name to formally unveil an e-business strategy this week, aimed at both the institutional and individual markets. It expects to spend about $800m over four years to expand online and wireless ventures in the US and Europe. It plans to provide news and financial data to Palmpilot users in Europe, together with Aether Systems. It has also concluded a joint venture with New York-based Multex to create an investors community Web site in Europe, while for consumers, it plans to create a financial portal.

The last strand is a joint venture with another US-based company, Equant, to create a closed business-information extranet made up of 60,000 affiliated Web sites that can link paying business users to e-commerce opportunities.

David Bicknell

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