Here's an ACH originator becoming a BSP.
These people look similar to eCom and BLLS and CKFR except they do the ACH themselves. CKFR has a relationship with a bank to do the ACH transfer- I think Wells.
Noise
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Pay-to-Pay ACH? Fort Knox Says It Has Lots of Takers
American Banker Thursday, May 23, 2002
By Priya Malhotra
Fort Knox National Co., one of the few nonbanks among the top 50 automated clearing house originators, offers an unusual proposition: It invites corporations to accept electronic payments by passing along the cost of the system to their retail customers.
The company, which is also the country's 27th-largest debit processor, says that charging consumers a small fee per transaction is an easy way for corporations to offer e-payments without making huge financial investments.
But do consumers pay to pay?
Yes, said J. Joshua Hartlage, Fort Knox's vice president of sales and marketing. He said the Elizabethtown, Ky., company's main clients are in the mortgage, auto lending, and personal finance industries, where payments tend to be large and late fees hefty - and thus a small surcharge does not deter in the least.
"What we see is consumer demand outpacing corporate initiatives," Mr. Hartlage said.
Fort Knox processes electronic payments by telephone, the Internet, and file transfer. Its more than 750 clients across the financial services industry include Chrysler Financial, the auto financing arm of Chrysler; General Motors' GMAC; Mitsubishi; and Household International. It handles about $12 billion of payments a year and is also the largest payment processor for the Department of Defense, handling about 80% of the agency's allotment transactions.
"With our solution," companies can get into electronic payments "at a very economical rate and see what the penetration is like," Mr. Hartlage said.
Fort Knox's surcharges on retail customers range from 50 cents to $5 per transaction, depending on the service and the volume, Mr. Hartlage said. The schedule is not as good a fit with the credit card and utility businesses, where payments tend to be smaller, he said. "Our model does not fit everyone. The surcharge is "harder to justify as the payments get smaller."
Michael Herd, a spokesman for Nacha, the electronic payments association, said Fort Knox was the 45th-largest ACH originator in 2001, originating 11.5 million transactions, up 104% from 2000.
"Some consumers are willing to pay a small fee to have a payment accepted and considered on time on the phone rather than have a payment to be late," Mr. Herd said. "But typically consumers do not pay a fee for ACH transactions."
Chrysler Financial said it has been pleasantly surprised by the response to the service, which it started offering last year. "We did nothing to promote the business, and it's growing far better than expected," said Karen Brewster, Chrysler Financial's manager of lockbox control.
Ms. Brewster said customers "don't seem to care" about the extra fee and that she had received no negative customer feedback about it. She commended the Fort Knox business model, saying that it required minimal investment on the part of corporations and that it has a bonus - the legal and Nacha compliance issues are taken care of by Fort Knox.
Mr. Hartlage said Fort Knox did 350,000 electronic transactions and moved more than $150 million for Chrysler Financial this past year, handling 60,000 payments a month after Chrysler had said it would be happy if the volume only reached 20,000. Ms. Brewster said she expects the volume of electronic payments to double in the next six months, and said that Chrysler plans to start offering electronic bill presentment next month.
Fort Knox offers consumers the option of one-time or recurring payments, and most choose a one-time payment, Mr. Hartlage said.
"Customers are control freaks," he said. "There is a control factor here in the United States. When that payment leaves their bank account, people want to make sure that they are the ones that control the execution of the payment. If everyone did recurring payments, we'd be playing golf and going fishing all day."
That aspect extends into bill presentment, Mr. Hartlage said. The existence of a paper bill gives people a sense of control and a "safety net," he said.
Mr. Hartlage said he expects e-payment in general to continue rising "significantly," and he predicted that 20% of bills in America will be paid electronically in the next five years, compared with 3% now.
"Companies are knocking at our door a lot more now," he said. "Since the beginning of this year, business has really started to take off. We are at the end of the early-adopter phase, and I think things are starting to move upward."
Fort Knox's offerings include PointClickPay.com, a private-label Web site that is designed to look like a part of the customer's site but is maintained and secured by Fort Knox. The system lets consumers make payments by telephone, either through Fort Knox's call center or through the corporate customer's.
The file-transfer system processes ACH transactions at the back end, and the client company does its own customer service. This method is suited to companies that want to maintain their customer relationships, Mr. Hartlage said.
He said that about 60% of Fort Knox's clients use its call center and that the rest are evenly split between the online and file-transfer methods. The file-transfer method and the call center each process about 40% of its transactions and the Web site about 20%.
A private company founded in 1985, Fort Knox is "very profitable" and its revenues have been growing 35% a year, Mr. Hartlage said.
"We don't see very many barriers, because there is pent-up consumer demand," he said. "Our biggest challenge is getting corporations to understand our business model more and getting our solution out there." |
