Stalling E-Commerce Places the Future of Trade Credit in Doubt.

What a difference a year makes! Twelve months ago e-commerce was riding high, online exchanges were proliferating, financial intermediaries were scrambling for a place at the table--sometimes as the provider of trade credit--and credit managers might reasonably have wondered how long their jobs would last.

Now that venture capitalists have pulled their backing from many of the online exchanges, the technology revolution has shifted into low gear, and credit managers might reasonably wonder if their workloads will ever get lighter. But savvy credit managers recognize that today's chill is no better a sign of the future than last year's fever, and they are preparing for a variety of outcomes.

The vision of e-commerce ran into the realities of embedded business processes, and the result has been slower-than-expected adoption, observes Ken Wood, senior vice president and manager of global e-commerce strategy at Bank of America. "We all bought into the hype and expected too much too soon. Credit managers will have secure jobs for a long time," he predicts.

There's still a big gap between where we are and where we want to be," notes Mark S. Coronna, senior vice president and general manager of electronic payment services at US Bank, Minneapolis. "Over 80 percent of business-to-business transactions are still settled by check. We're in the early, trial-and-error stages of what will be a long process; it's hard to predict what the winning solutions will look like."

But that's not to say that things are standing still. "A lot is going on," observes Penny Gillespie, senior industry analyst at the Giga Information Group, Cambridge, Massachusetts. "Banks are banding together and organizing payment hubs. Some are simply mechanisms for making payments electronically, and some include credit providers. A number of banks choose to start with the purchase order, while others begin with authentication of the parties or the invoice. Then, they take the process forward through settlement. Some are building strength in international payments, but none of them is building a new way to move money. They all tie into the established bank payment networks."

"The 'financial supply chain' is getting a lot of attention today," reports Randi Purchia, research director of Advanced Manufacturing Research (AMR), Boston. "We found 35 vendors who claim to provide the settlement piece that has been missing from e-commerce." The popular model seems to provide immediate, assured payment to the seller once terms of the sale have been satisfied and extended payment terms to the buyer, with a third party providing the credit, she summarizes.

The very proliferation of untested technology is making some financial executives cautious. "Financial people are naturally conservative," says Aaron McPherson, research manager for IDC, a research and analysis firm based in Framingham, Massachusetts. "They know that integrating an electronic settlement service with their legacy systems will be expensive. They're waiting for a clear leader to emerge so that they'll only have to integrate once."