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VISA IN CONCERT WITH CHECKFREE
May 28, 1998
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RETAIL DELIVERY NEWS via NewsEdge Corporation -- CheckFree's venture with Visa to create a new infrastructure for integrated billing and payment ultimately may drive billers to use the model for electronic bill presentment and payment delivery, company officials say.
San Francisco-based Visa announced May 20 it would provide development of electronic debit and settlement functionality while Atlanta-based CheckFree [CKFR] will provide remittance processing.
CheckFree processes more than 50 percent of its payment transactions electronically. The new joint venture infrastructure, however, could increase electronic transaction processes to as high as 85 percent, company officials predict.
"CheckFree gains another avenue to reach merchants that can accept electronic payments," says Laurinda Wilson, spokes- woman for the payments processor.
Integrion's interactive financial services platform, developed as a framework for its 17 member banks, will provide a seamless connection to the joint Visa/CheckFree infrastructure for its member bank online service offerings.
U.S. consumers pay more than 18 billion bills annually, at a total processing cost of more than $14 billion, according to a report from the Tower Group in Newton, Mass. Online bill presentment and payment services can reduce these costs, but since the majority of them are not borne by consumers but by billing entities, the burden of implementing the technology will fall upon bill issuers, banks, and third-party bill concentration, presentment, and payment service companies.
Long-term Impact Questioned
But Visa's impact on the CheckFree model still is uncertain, analysts warn.
Visa provides a new distribution source for CheckFree's front- end system interface for merchants that could grow processing volumes, but the credit card association has failed to conquer the home banking payment market so far, says Gary Craft, an analyst at Robertson Stephens in San Francisco.
"With Visa, the jury is out," Craft says. "Their track record is not that strong in moving into home banking and hitting a home run. They haven't even gotten to first base yet."
Don't count MSFDC out yet, sources say. While the CheckFree/Visa announcement may give them the edge in bank backing and make their business model more competitive with MSFDC's,. billers ultimately will determine who wins the race.
The venture will have limited impact on MSFDC, a competing bill presentment/payment concentrator formed by Redmond, Wash.-based Microsoft [MSFT] and Hackensack, N.J.-based First Data [FDC], if the effort fails to reach the biller community, Craft predicts. CheckFree needs to continue targeting the biller side of the equation, Clark stresses. "Billers are the key. Whoever controls the biller controls the payment stream."
David Mediros, an analyst at Tower says the Integrion/ CheckFree alliance does provide two distinct market advantages:
* Incumbency with the banking industry. CheckFree has more than 50 percent marketshare for providing back-end payment processing in connection with banks' front-end online payment processing services. CheckFree also has enlisted approximately 20 major billers in its "E- bill" electronic bill presentment services; and
* Banking industry participation via the Integrion alliance. This somewhat eases banks' anxieties that technology vendors will come between banks and their customers, or attempt to displace them in the retail payment processing business.
Historically, CheckFree's business model for online "pay anyone" services has been based on obtaining revenue from banks that subscribe to CheckFree's services, based on banks' customer demand for the service.
This business model may have to change in the future, however, as Integrion and CheckFree further explore the possibility of obtaining their revenue from billers that subscribe to newly offered electronic bill presentment and payment services, and as new market competitors -- including MSFDC -- change the business dynamics of the market.
Signing On Billers For The Service
To date, Integrion has enlisted five banking industry partners - - NationsBank [NB], First Chicago/NBD [FNB], Bank One [ONE], PNC Bank [PNC] and Michigan National [MNCO] -- as test cases to use IFS as a home banking network. The $155 billion bank will roll out an integrated service offer in the fourth quarter that lets customers receive bills electronically.
The system will connect Integrion's IFS platform and CheckFree's bill presentment and remittance system with Banc One's internal bill payment engine.
The new system will benefit both its consumer and commercial customer base, says Bruce Luecke, president of interactive delivery services for Banc One of Columbus, Ohio.
On the consumer side, there are customers who wanted bill presentment and bill payment integrated. It is an easier way to get bills and pay them in one place. Many of Banc One's biller customers wanted to send bills electronically to lower their costs, Luecke explains.
Customers then can pay these bills through their computer, transferring funds directly from their bank accounts to pay any biller that presents an online bill through CheckFree. Once activated, the customer can pay bills from the online summary page or choose to see the full bill detail.
The bank at this point has no preference for either the CheckFree or MSFDC model, Luecke says.
"We work with whoever the biller wants to work with," Luecke says. That includes CheckFree, MSFDC or any other third-party processor for payment or presentment, he says.
Luecke tries to keep the competing models in perspective. The customer doesn't care about maneuvering on the back-end and whose standard will drive the industry.
"We want to grow that industry and that piece of the business and have been working to convince CheckFree and MSFDC, Integrion and others that we have to do it together * If we do that, there will be pieces of the pie for everyone."
The MSFDC model first will be tested in a pilot with bank employees. Initially, the MSFDC model will not be integrated into Banc One's online service offering. "MSFDC is just getting off the ground and doesn't have a track record yet," Luecke says. The bank wanted to test the system in a closed environment before investing time and money to integrate it into its online service.
MSFDC Model Fights For Staying Power
MSFDC operates according to the model where billing data and payment services can be accessed first from a bank site (summary-level billing data and payment instructions), and then via a linked separate networking session, from MSFDC's site, where detailed billing information is maintained. Payment is made at the bank's site.
The MSFDC business model charges billers that subscribe to MSFDC's services, rather than banks that access summary and detailed information provided by the biller. MSFDC says the charges to billers to use the service are far below what the biller would spend to send, process and settle bills manually. MSFDC anticipates charging billers approximate 25 to 35 cents for each transaction. The service will be provided free of charge to consumers who access the site directly. MSFDC plans to share revenues with banks that offer the service.
"CheckFree is running scared their whole model has changed to copy ours as we have made gains with their key banks before they have been able to," says Jessica Ostraw, vice president of marketing at MSFDC. MSFDC was designed from the ground up for Internet bill delivery and payment, Ostraw says. The bill provider is working with banks and billers not only to develop an infrastructure, but will help billers make the transition to electronic bill presentment for free.
(Gary Craft, Robert Stephens, 415/248-4202; David Medeiros, Tower, 617/965-9090, ext. 215; Jessica Outstrow, MSFDC, 612/841-6172; Laurinda Wilson, CheckFree, 650/432-2753; Bruce Luecke, Banc One, 614/213-5677.)
Marketplace Supports Multiple Models
CheckFree [CKFR] and MSFDC are not the only active participants in the quest to help billers and banks deliver bill payment/presentment features to their customer base.
San Francisco-based Just In Time Solutions debuted its family of bill presentment software BillCast, designed to give billers control of the customer interaction last week.
The software supports multiple consolidation channels such as home banking and personal finance managers, as well as direct presentment to the consumer through the biller's own Web site.
Just In Time supports a "thin consolidator model" that gives consumers a single point of sign- up authentication, bill receipt and payment and allows billers direct interaction with their customers, explains Mike Lanza, president and CEO of Just in Time. Thick consolidator models like MSFDC, conversely, require billers to hand over sensitive billing information to consolidators and intercedes direct interaction between the biller and the customer, he explains.
In the thin consolidator model, customers still interact with consolidators for receiving and paying bills, but when they request the bill detail, the request is redirected to the biller, Lanza says.
MSFDC developers, however, say that billers are comfortable handing over sensitive information to bill processors, and do so on a regular basis like ALLTEL [AT] or First Data Corp. [FDC].
Little Rock, Ark.-based ARKSYS, meanwhile, in conjunction with Minneapolis-based TriSense Software Ltd, will deliver PaySense, an electronic bill presentment/payment system to market for U.S. mid- range financial institutions.
With PaySense, banks can control all aspects of the service, including the biller relationship, management of the biller's data and service fee pricing, says Mary Rose, vice president of business development with ARKSYS.
Acting either as an Internet or intranet system, the products provide bank customers with online, real-time access to accounts and data. PaySense delivers bills and payments via an enhanced E-mail facility. (Mike Lanza, Just In Time, 415/553-6400; Rob Roedel, ARKSYS, 501/218-7226.)
[Copyright 1998, Phillips Publishing]
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