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Bertelsmann venture to aid European B2B exchanges

i-Escrow announces a deal with a unit of the German media giant to form i-Escrow Europe, which the company says will address the needs of the growing sector.

Online financial services company i-Escrow announced a deal today with a unit of German media giant Bertelsmann to help expand Internet business exchanges in Europe.

As previously reported, Bertelsmann Financial Services will team with i-Escrow to form i-Escrow Europe, a venture the companies say will help fill the need for services among business-to-business exchanges that iron out the difficulties of cross-border business transactions.

Online escrow services provide a third-party intermediary to ensure buyers and sellers fulfill business agreements. Instead of paying a seller directly, buyers pay an escrow company, which then shuttles the payment to the seller--only after the buyer receives and approves the goods.

The new venture is a centerpiece of i-Escrow's push to expand internationally. Although several escrow services companies such as Escrow.com, i-Escrow and Tradesafe.com popped up to meet demand from online auctions, they have not received as much business as expected. These companies are trying to find new life in the growing business-to-business sector.

One of the biggest challenges for online marketplaces is how to streamline the process of transactions. While orders can be placed online, payments often are processed through tedious offline paperwork.

Earlier this year, big financial players including American Express, Visa and MasterCard formed alliances with U.S.-based Internet companies in a move to ease payment online. Several start-ups, including i-Escrow, InPurchase and eCash, are also trying to find ways to fill holes in the payment process.

i-Escrow's deal could help it consolidate its leadership position in the online escrow market. Bertelsmann Financial Services handles more than 45 million transactions annually, including financial and settlement services.

i-Escrow Europe will be based in Dublin, Ireland. Bertelsmann will own 51 percent of the venture, with i-Escrow holding the remaining 49 percent.