Updated from 1:51 p.m. EST

Online auctioneer

eBay

(EBAY) - Get Report

and

Wells Fargo

(WFC) - Get Report

, the seventh-largest bank in the U.S., announced on Wednesday a strategic alliance that will enable sellers to take credit-card payments over the Internet.

Wells Fargo agreed to take a 35% stake in

Billpoint

, an online payment technology firm that allows winning bidders to buy items with a credit card straight from a seller's auction page, for an undisclosed sum. Wells Fargo will provide payment processing and customer care.

eBay will charge 35 cents per transaction and a maximum commission of 3-1/2% for gross merchandise sales. Wells Fargo will receive a nominal processing fee for each credit-card transaction.

The bank's goal is to "be the preferred payment provider in the virtual space," Debra Rossi, executive vice president of business Internet services at Wells Fargo, said in an interview. She boasted that Wells Fargo was the first bank to process a secure credit-card transaction on the Internet, for an online wine-purchasing site. Now it processes $1 billion in annual sales transactions for over 3,500 merchants.

"Wells Fargo has been working diligently to expand the practice of bill payment and bill presentment online to its customers," said analyst Katrina Blecher of

TheStreet Recommends

Brown Brothers Harriman

. "It's in line with the company's Internet strategy." She rates Wells Fargo a long-term buy and short-term neutral and her firm has done no underwriting for the company.

eBay acquired Billpoint in May 1999 for an undisclosed amount, though it was announced at the time that eBay was issuing $275 million worth of stock for both Billpoint and

Kruse International

, an automobile auctioneer.

Currently, 98% of eBay's $4 billion in gross merchandise sales are settled by either check or money order. It takes an average of 14 days to settle these transactions. "The important thing is to make transactions on eBay as easy as humanly possible and this certainly helps," said analyst Scott Van Winkle of

Adams, Harkness & Hill

. "If writing a check or receiving a check was an impediment, that's now been removed."

He rates eBay an accumulate and his firm has done no underwriting for the company.

"This alliance brings reliable and secure online payments to millions of new buyers and sellers from the comfort of home," Dick Kovacevich, president and chief executive of Wells Fargo, said in a statement.

eBay is also in the process of developing a new revenue stream. "It's creating a product that it can sell by later this year to other online e-tailers," Van Winkle added.

"The goal is to start off with the eBay community and then go out across the Internet, targeting the person-to-person space and the person-to-small-business space," Janet Crane, chief executive officer of Billpoint, said in an interview. She said Billpoint would be ready to target other potential customers in the summer.

Analyst Henry Blodget of

Merrill Lynch

goes further and sees Billpoint "developing into a broader standalone person-to-person payment platform for use on the Internet." He thinks, too, that eBay could consider spinning off Billpoint in an eventual initial public offering. He rates eBay a buy and his firm has done no underwriting for the company.

In Wednesday trading, shares of eBay, based in San Jose, Calif., closed up 5 7/8, or 4%, to 149 1/4, while shares of San Francisco-based Wells Fargo were up 1 5/8, or 5%, to 34 11/16.