American Express plans business, consumer buy site

Giant credit card company will also audit business and consumer bills and recover funds

Code-named Purchasing Portal, American Express is expected to launch a consumer service in the fourth quarter that will give American Express cardholders access to American Express's own negotiated rates for thousands of products that it buys annually.

In addition, plans calls for a service that will monitor consumer cellular phone bills and help recover funds when a network provider makes a billing error or overcharges.

American Express spends approximately $1 billion per year on MRO (maintenance, repair, and operations) products. MRO typically includes everything from furniture, electronics equipment, and computers to mops and cleaning supplies. The new service will aggregate dozens of MRO shopping catalogs from suppliers such as Staples, Best Buy, and Dell into a single master shopping catalog.

"Once you get a finite set of about 100 catalogs, you have basically all the catalogs that exist," said Rion Needs, senior vice president of global financial operations and business transformation at American Express.

The master catalog will be hosted by American Express and will allow users to comparison shop but still buy directly from the various vendors without having to "punch out" to individual catalog sites.

The idea behind Purchasing Portal stems from a little-noticed announcement American Express made last week when it launched two new b-to-b services, Contract Audit & Recovery and Catalog Pro, as part of its Source-to-Settle suite of hosted applications.

One industry analyst said that these services could have far-reaching repercussions for b-to-b business, retailing, and consumers. 

By passing on the value of American Express's aggregate spending to the individual, it could dramatically increase the amount of online spending, according to Josh Greenbaum, principal at Enterprise Applications Consulting.

"This could give consumers confidence that they are getting the absolute best deal by shopping online rather than with a big-box retailer."

Online retailers may also benefit if American Express is willing to guarantee the validity of the card. At present, the merchant eats the whole price of an online purchase if there is fraud.

"If it is an unsigned deal, the credit card company doesn’t lose a penny."

The service would also vastly simplify the procurement process, especially for smaller businesses where integration from the sell site to the numerous different procurement engines companies use is always an issue.

The second service American Express announced last week for businesses will also have a consumer component but one not planned for 2007.

The Contract Audit & Recovery service is an online service that automates the accounts payable and purchase order process.

The audit service monitors and manages all purchasing aspects of a contract and identifies when pricing is at variance with current pricing schedules based on the supplier-buyer contract.

According to a recent study by Aberdeen, 22 percent of all negotiated savings put into contracts never come to fruition because of leakage between implementation and payment process, said Needs.

The service will identify discrepancies and billing errors and will help in the recovery from a supplier of any funds owed.

If a client is large enough, American Express will send along its own executives with the client to the supplier site to broker a settlement, according to Needs.

Needs said American Express used its own system to save $55 million on $1 billion of purchases made last year.

The service is free, with American Express receiving a percentage of the savings.

According to Needs, Audit & Recovery is also planned as a service to consumers, with Needs citing as an example the classic problem with cellular phone bills.

"That is one of the biggest opportunities," said Needs.

Whenever there is a large transaction volume and complex pricing, as in wireless, the consumer finds it hard to understand what all the numerous fees are. Take, for instance, a cellular phone bill.

The service automates the process by inputting all parts of an individual's or a business's cellular service contract, matching those contract agreements against the monthly bill.

American Express has a reputation for high-touch customer relationships that usually takes the side of the consumer over the vendor until it is proven differently, said Greenbaum.

If American Express uses the same business model for consumers for its Audit & Recovery service that it uses for its corporate customers, getting paid a percentage of recovered funds, then Contract Audit & Recovery may turn out to be one of its most popular services to date.

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