Electronic buying and selling cuts overheads dramatically,
Small businesses can defeat late payment by selling goods through the Internet, with the introduction by Barclaycard of an on-line payment arranger. Not only are transactions secure using the latest encryption system, but payments are guaranteed within four working days.

Although Barclaycard's PurchaseOnLine is a pilot, the bank says that any corporation that already uses a business charge card can join, and there is little doubt that the service will be made permanent. It is an extension in use of the existing Barclaycard Company Purchasing Card, which was launched on a trial basis in 1994 and became generally available in December last year.

The new scheme uses the same card, but the transaction takes place entirely electronically. To sell, you must have a Web site on Barclays controlled pages - the business equivalent of its BarclaySquare electronic mall - and you will be able to buy only from those companies on Barclays's site.

Barclays says that its charge cards already have benefits for corporates, both in selling and buying. A flowchart at one major corporation found that a typical low-value purchase went through 42 stages between initial order and final payment, at a typical cost per transaction to the corporation of almost pounds 25. Using PurchaseOnLine, the process is simplified to an integrated single stage, which initiates payment at the time the order is placed.

BOC, one of the initial charge card users, calculated that it saved pounds 200,000 during the period of the pilot. The card is aimed at the low-value transaction market - research by BOC found that 61 per cent of purchases accounted for 1.3 per cent of their total value.

Barclays charges pounds 1 per transaction on top of pounds 28 for each card issued, and there is no extra fee for using the card for PurchaseOnLine. Cards are given a monthly credit limit and a ceiling of pounds 250 per item bought. A major advantage for vendors is the guarantee of payment within four working days.

The bank expects this system will attract more companies on to its site (address below). Organisations with a presence now include Anglian Water, Farnell Components, XMA Computers, Fisher Scientific, Gilbert Ofrex and Imperial College.

Barclays says that many merchants who are participating have indicated that they are willing to pass on some of the savings achieved from cutting out delays in payments, giving customers discounts for buying on-line. Special offers are also likely to be made available.

Competitors such as American Express are expected to launch their own charge card alternative to PurchaseOnLine soon. Within a couple of years the charge cards will become smart cards, replacing magnetic strips with computer chips. By then the next generation of PCs, which will contain smart card readers, will be on sale. This will allow Internet transactions to be conducted with debits instantly made against electronic purse smart cards.

But Barclays says that even with the current generation of technology, on-line payments are entirely secure. PurchaseOnLine involves the first use in Britain of 128-bit key encryption, under licence from the US Government, which the bank describes as "one of the highest forms of security currently available".

Barclays stresses that the impetus for this project comes not from the bank, but from its business customers. When clients were asked what they wanted the bank to do for them, many companies said they wanted a business equivalent to the BarclaySquare, the Internet site for personal consumers.

But PurchaseOnLine fits within the new role that Barclays is fashioning for itself. Spokeswoman Chris Tucker says: "People use banks because they want to buy things. We want to ensure that customers use Barclays for the settlement."

All the big clearing banks recognise the threat posed to their traditional role as transaction intermediaries by the Internet, where Internet service providers, retailers, and telecoms and media companies might create infrastructures through which commerce is conducted. Barclays in particular is determined to take the initiative in reshaping the way it acts as intermediary, designing electronic services that give added value to customers.

Among Barclays ventures is the Car Shop, which puts sellers and buyers into contact through BSkyB's interactive teletext service. Another is Car Direct, which provides business and personal new car buyers with discounts using the Barclays subsidiary's bulk-buying capacity. Each venture is designed to provide a customer benefit in return for maintaining the bank in the key role of arranger of a commercial deal.

The Internet is beginning to deliver its much-hyped promises of freeing up trade and cutting overheads. Long may the process continue.

More details of Barclays's PurchaseOnLine can be found on the Web at http://www.barclays. co.uk/psmd/purchaseonline, or by phone on 0800 400170.

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