This mentions CKFR...not in a good light, but a mention.
By Scott Adams and Ben Dummett
TORONTO (Dow Jones)--BCE Emergis Inc. (T.IFM) made a big splash when it
announced an electronic-bill-presentment deal with e-route inc. The company
expects the transaction, which involves the delivery, presentment and payment of
bills over the Internet, to bring in C$1 billion in revenues for BCE Emergis
over 10 years.
It also sent the stock soaring. It was trading in the low 20s before the
company confirmed in February that talks were underway and the deal helped it
reach a 52-week high of 47.50 in mid-April. The stock has since fallen back and
is trading Wednesday in Toronto at 36.40.
Now that the e-route service is only months away from its startup, the heat is
on for BCE Emergis to prove the deal is sweet as the market believes. That
largely depends on two factors - acceptance of the new service by Canadian
customers, and the level of competition in the Canadian bill-presentment
industry.
To be sure, there are several hugely positive factors in this contract.
Anytime a company has the opportunity to deliver bills over the Internet for
such Canadian financial heavyweights as CT Financial Services Inc.'s (T.CFS)
Canada Trust unit, Canadian Imperial Bank of Commerce (BCM),
Desjardins-Laurentian Financial Corp. (DJN.A), National Bank of Canada (T.NA),
Royal Bank of Canada (RY) and Toronto Dominion Bank (TD), the upside is
tremendous. Industry reports show that sending bills and receiving payment over
the Internet will be a huge growth market.
Consumer Acceptance A Question Of When, Not If
However, the big unknown is just how quickly Canadians will take to the
service. The amount of time the acceptance process takes will directly affect
the timing of profits for e-route and BCE Emergis. "There's no doubt consumers
are going to take to it, (but) it's a question of how quickly," said David
Dunford, director of self-service banking at Toronto-Dominion Bank, an e-route
shareholder.
And then there's the competition. In Canada, Canada Post, the government
postal service, has teamed up with Bank of Montreal (BMO) and Bank of Nova
Scotia (T.BNS) to form what will be called the Electronic Post Office. Service
is to start this summer, ahead of e-route which says it will have a pilot
project this fall and full rollout next year.
Expect other players to enter the fray, such as Derivion Corp. of Atlanta,
which is working with Utility Reading & Billing Ltd. to convince Ontario
utilities to sign up for Internet bills. Utility Reading works with about half
of Ontario's 300 utilities on paper bills and Derivion hopes to convince some of
them to sign up for electronic bills this summer. Derivion eventually wants
expand into other industries across Canada, focusing on mid-sized billers,
according to a Derivion spokesman.
In the e-route deal, BCE Emergis will install and support the technology,
while Microsoft Canada and Transpoint will supply software and hardware.
Transpoint is an Englewood, Colo. Internet-bill-presentment joint venture
between Microsoft Corp. (MSFT) and First Data Corp. (FDC). The Canadian
financial institutions involved with e-route will compete to sign up
bill-issuers, such as department stores, while BCE Emergis will handle the
technology behind the whole process, said Francois Cote, BCE Emergis senior
vice-president, business development. The fact that the Canadian banks will
compete to sign up billers is similar to what happened in the U.S. recently.
Checkfree Holdings Corp. (CKFR), a big U.S. provider of back-office payments
processing, was expecting a large part of its future growth to come from the
provision of Internet bills. However, its stock plunged in June on the news that
three banks decided to form their own electronic bill presentment service. Chase
Manhattan Corp. (CMB), First Union Corp. (FTU) and Wells Fargo & Co. (WFC)
decided to form a new entity called The Exchange, keeping electronic bill
presentment in house in order to maintain their relationships with their
billers.
"If you look at First Union, 35% of our net income comes from our entire
payments business," said LouAnne Alexander, vice-president of bill payment and
presentment project manager for First Union. The payments business includes such
things as receiving a department store's credit-card payments and paper
payments, consolidating them and distributing cash to subsidiary accounts. "All
of those services tie very well into the new electronic bill presentment,"
Alexander said. "We see it as an extension of those services we are already
providing to customers." US Banks Hoping To Create Central Exchange
Another reason for the banks to enter this business is their desire to form a
central exchange for bill presentment. The bank group is hoping to create a
standard infrastructure for Internet bill payments, in contrast to the current
situation where Checkfree and Transpoint have different technologies, Alexander
said. Standardization means ease of use, which ultimately means that the service
will grow in popularity.
The same problem with different technology infrastructures is emerging in
Canada, where e-route and Canada Post have different systems.
Derivion's approach is somewhat different in that it wants to set up Ontario
utility Web sites where customers can go to pay their bills. Derivion wants to
make sure its technology is compatible with other systems so that bills can be
passed along once other electronic bill presenters are working in Canada, a
Derivion spokesman said.
So when will BCE Emergis start making money on the venture? Bank customers
using the service will likely be charged "zero to very, very little," said
Toronto-Dominion's Dunford. As a result, "everybody is taking a risk on whether
the volumes will build up," Dunford said. "So will BCE Emergis lose money in the
early years? Probably. Will e-route lose money in the early years? Almost
certainly until volumes get built up."
BCE Emergis spokeswoman Anne Belliveau said the company isn't discussing the
cost of putting the system into service, or predicting when it will become
profitable. Beliveau said the company's C$1 billion figure meant two things -
BCE Emergis expects the Canadian market for bill presentment to be worth C$1
billion in transaction fees over the next 10 years, and BCE Emergis expects to
collect C$1 billion in revenue for bill presentment transaction fees, as well as
technology instalation and enhancements payments over the next 10 years. She
said BCE Emergis isn't forecasting how much of the C$1 billion transaction-fee
market it hopes to gain.
-Scott Adams; 416-306-2026; scott.adams@dowjones.com
(END) DOW JONES NEWS 07-28-99 11:30 AM
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