The article is not a bad summary. I work for Intuit, and was involved with this decision, so I need to be a little careful what I say. I do own some CKFR. But Intuit had limited appetite for the continuing losses necessary to build this business to profitability, given the alternative investment opportunities available.
As far as the CheckFree strategy goes, the key to long-term profitability is getting billers signed up, and delivering the integration with their billing systems - that is where the big economic value is added (not obviously, in mailing high cost paper checks). Scale in this business is critical to having lower costs (and thus higher profitability) versus second tier competitors, and CKFR is in good shape so far. Payments alone are not clearly a defensible long-term business (viz Europe, where low-cost or free interbank transfers are widely used, and in many countries a more common means of payment than checks).
As far as the future goes, I have no crystal ball, but here are some thoughts. The big billers are the key to getting a position established. The next question is what will happen with medium and smaller billers. One key competitor to CKFR is probably the card- based payment model, and the different players there. If a merchant holds a card number for a customer, they can do the debit through their card clearing agent. This is one area where FDR is clearly a leading player. The services offered to the massive billers are clearly different from those for smaller merchants, but it is unclear to me how far / whether they will converge in the medium term.
There are a number of different payment and hosting service businesses involved here:
1. merchant / biller acquiring (clearing payments for merchants)
2. hosting of bill information for billers
(includes system for automated reconciliation of payments)
3. concentration of bill information for end-users
4. clearing payments to payor's bank account
The differences between the card and bill-pay models are:
2. this doesn't exist for card payments - I'm not well informed about typical merchant systems for reconciling card payments
3. I haven't checked, but I imagine CKFR does this. Intuit/JITS, for example, also operates such a server for Quicken users with bill summary info, which links to biller sites for the bill detail
4. CKFR does this through the ACH debit authorisation process. For cards of course it's the card networks.
I haven't really thought too much about what will happen here, but the big biller business looks fairly defensible to me whatever happens here. |
