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Technology Stocks : CheckFree Holdings Corp. (CKFR), the next Dell, Intel? -- Ignore unavailable to you. Want to Upgrade?

To: TLindt who wrote (7036)	6/24/1999 7:50:00 PM
From: Longterminvest	Respond to of 20297

Hi everyone, Here's a link to a McKinsey Report published in November of 1998 on EBPP. mckinseyquarterly.com The main course of action suggested for the banks was this...... WHAT SHOULD BANKS BE DOING If banks want to see the adoption of an open-standard EBPP model that is bank-friendly, they have no choice but to collaborate both among themselves and with others (such as technology vendors). Even the largest banks do not have the reach and credibility to be shapers on their own. Collectively, however, they could influence the development and adoption of a particular open standard. That said, not all banks have to lead the way in EBPP. How each bank should proceed will be determined by its online financial service strategy as well as by the size and nature of its wholesale and retail bases. ------------------------------------------------------------------- I think this is precisely what the banks are doing. Also here are some excerpts from the article itself... The closed-system model In the closed-system model, a single vendor controls all aspects of the EBPP system, architecture and service, and builds proprietary interfaces with billers. This vendor is the exclusive consolidator of bills, but may work with electronic banking sites and others to give consumers access to these bills. CheckFree, the leading electronic bill payment network provider, operates on such a closed system. In 1997, CheckFree had an 80 percent share of the bill payment market, or nearly three-quarters of the current $150 million bill payment revenue stream from 2.2 million customers. It has enlisted most of the top banks, developed a biller database of 3 million businesses, and, through IBM, secured the technology capability to integrate the back-office systems of billers and banks. However, it has not unbundled the value chain in a way that would allow it to share value with other players, or that creates economic incentives for adoption. CheckFree controls and operates the entire system, having its own employees install custom software at participating biller and bank sites. As a result, it has high costs for setting up new billers and banks, and high transaction prices. Despite CheckFree's success, we believe that this model cannot succeed in the longer term, since it will never build the scale that others with more open systems and standards are likely to achieve. Perhaps in recognition of this, Checkfree appears to be opening up its system to allow a greater level of participation by other players. The shaper-controlled model In this model, a single player controls the overall architecture of the system but parcels out portions of the EBPP value chain to other players. In this way, it creates incentives for the various technology vendors, banks, payment and transaction processing service providers, suppliers of personal financial management software, billers, and independent software integrators to do whatever they can to promote adoption and challenge the spread of competing standards. TransPoint, the EBPP business owned by Microsoft and First Data Corporation, is an example of a shaper-controlled consolidator, with EBPP clearly part of a broader agenda for the two companies in electronic financial services (Exhibit 4). TransPoint has unbundled the EBPP value chain in several ways. It is building its base of billers by encouraging biller remarketers (which might be banks or other companies with relationships with small businesses) to enroll small billers and plug them into the TransPoint system. For this service, biller remarketers will receive revenue (perhaps $0.16 per transaction). TransPoint also relies on a large pool of Microsoft resellers and systems integrators to install its software and servers at biller, biller remarketer, and bank sites.