Eyeing a wave of small businesses eager to get online, Bank of America has launched a service that helps companies build and manage online stores.
The move by the North Carolina-based bank comes at a time when financial services companies and other companies are competing to provide back-end services to a potentially massive market of small and mid-sized merchants. Those retailers are often intimidated by the cost and complexity of handling online transactions, analysts say.
"We're providing small and mid-sized businesses with tools that will allow them to be part of the Internet rush at a nominal cost," says Sharif Bayyari, president and CEO of Bank of America's merchant services division.
Bayyari says banks are a natural fit for providing online services like bill processing, credit card authorisation and payment services because they have vast experience with such things in the offline world. And unlike companies that outsource to third parties, Bank of America is able to offer customers the security that all transactions are handled within the bank, he adds.
The new service, called Internet Order Center, will cost $US100 a month. Bank of America will take customer orders for its merchants, calculate shipping and taxes, track inventory and authorise customer payment. It will also collect a small transaction fee whenever a purchase is made by credit card. For an additional one-time fee of $250, the bank will help to design and build Web stores for companies that are not yet online.
Although Web hosting is not something businesses generally associate with banks, financial services companies are realising that by offering a broader range of services, they are better able to retain their most lucrative customers.
San Francisco-based Wells Fargo last month launched a similar service for small businesses called One-Stop eStore. Wells lets customers build their own sites from a library of templates and graphics. The bank charges anywhere from $49 per month to more than $250 per month, depending on the number of products a site offers for sale. As the back-end payment processor, Wells also gets a per-transaction fee, equal to about 2-3 per cent of each sale.
Wells plans to upgrade customers to more sophisticated services as the merchants ramp up their businesses online. "A good portion of our small-business customers will grow to be much bigger," predicts Debra Rossi, executive vice president of Wells' e-commerce and electronic payment services. "We'll be able to provide solutions that can fit their needs as they grow."
But Bank of America may be in a strong position to compete. It has about 2 million business customers -- more than any other US bank -- that may want to take advantage of the bank's offer to promote participating companies to its 20 million credit card holders.
The bank is also hoping the Bank of America name, which will be displayed in a logo on registered merchants' online order forms, will allay customers' fears about buying on the Web. Merchants will not get customers' account information, Bayyari says, and all registered retailers will be screened.