The Bank of Montreal this fall will introduce its commercial customers to an online marketplace co-founded by its Harris Bank subsidiary in the United States.

The Bank of Montreal (BMO) Thursday said its marketing department would contact Southwestern Ontario customers to try out the marketplace, which is operated by Lee’s Summit, MO-based eScout, before the full rollout in early 2002. BMO also said it would invest $10.8 million and place an executive on its board of directors.

eScout will be offered through the bank’s Web site and will offer customers the opportunity to purchase items like office supplies and computer equipment. Marnie Kinsley, the BMO’s executive vice-president of e-business, said eScout differentiates itself from other e-marketplaces because everyone in the community will be trading with buyers and sellers that are known to the financial institutions as champions. “We create a very fraud-free environment,” she said. “They know that they can trust who they’re dealing with, that they can establish trade relationships that are going to be longer-term.”

Despite the financial difficulties of e-marketplace specialists like Commerce One and the closure of Dell’s entry to the B2B trading sector, Kinsley said she sees considerable potential for the service.

“This whole thing has satisfies two of our strategies at the bank, the first one being to focus on the small and medium-sized enterprise marketplace,” she said. “We also want to continue to establish new e-businesses, so the equity position in eScout is really important to us. We want to build and create new e-businesses.”

Sandy Kemper, co-founder and CEO, said eScout’s team was already trying to set up agreements with at least half a dozen Canadian suppliers who would offer around 100,000 items. EScout already works with more than 1,300 banks in the U.S. (Harris Bank was one of eight founding members) with approximately 2.5 million commercial users.

“One of the secrets to our success has been that the banks validate that the buyers are good,” he said. “You get this wonderful virtual cycle where the buyers buy from the suppliers and the suppliers then want to map in more product. When there’s more product mapped in through us the buyers buy more, and its just keeps eating on itself.”

Kemper said he believes e-marketplaces will one day facilitate the trading of higher-value items than what most carry today.

“The easiest thing to do in the marketplace are the commodity items, the basics,” he said. “The basics are meant to be a way of gradually inculcating oneself to the potential of electronic commerce. We look at the basic goods that we sell today as a Trojan Horse for the banks.”

Kinsley agreed, adding the banks will extend a feeling of security to many users wary of the service.

“It will be embedded within, so therefore other products and services will be in a space where customers feel comfortable,” she said. “They’re coming to for loans and investment services, so that connection to the things that we do are very important. But we’re also looking at other connections.”

For example, BMO also runs Merx, the online RFP tendering service for the federal government, and Kinsley said she is interested in developing other auction and tendering services.

Kemper acknowledged that a big challenge for many e-marketplace vendors is helping suppliers import their legacy data into the system.

“We do a lot of that for them,” he said. “It’s not just technology. There’s a lot of elbow grease in just the blocking and tackling of running a marketplace: standardizing content, doing everything that needs to be done to enable transactions.”

Kinsley said the eScout e-marketplace would be open to all of its 440,000 small and medium enterprise clients, but that it was difficult to estimate how many of them would participate.

“We don’t have a goal yet,” she said. “We just know we want to put it out there and make it available to all our commercial clients.”

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