All Signs Point to 'Yes" for E-Bill Industry
April 1, 1999
RETAIL DELIVERY NEWS : You don't need a crystal ball to see the future is bright for electronic bill presentment/payment in 1999.
"This is a brand new product consumers don't know about yet, and while [banks] are anticipating cost savings or reductions ... down the road, competitor differentiation, revenue generation on the wholesale side, and customer retention from both the retail and wholesale side, is driving the market," says Ed Neumann, research manager at Farragut Group, a Washington-based consultancy.
Interest in bill presentment and payment is largely due to a shift in thinking by corporate cash management departments in banks and the subsequent collaboration with the bank's retail business, he says.
In some cases, banks have appointed a "payment czar" that coordinates different department payment systems. "We applaud that effort," Neumann says.
That piqued interest has been duly noted by Internet consolidators CheckFree [CKFR] and TransPoint. Last week, PNC Bank [PNC] announced it would pilot the technology with CheckFree, while TransPoint signed on Wachovia Corp. [WB] for its electronic bill presentment service.
Neumann expects to see a continuation of pilots and rollouts, but not a lot of generated volume until the fourth quarter. There was a lot of interest and some activity for bill presentment services toward the end of last year, Neumann says.
That seems to have ebbed a little in the beginning of the first quarter, but should pick up again in the next six months, he says.
Y2K Plays Havoc With Implementation Schemes
Year 2000 clearly is on the mindset of bankers, most likely because of integration concerns, admits Ralph Young, an executive vice president at TransPoint. TransPoint's model reduces this headache considerably since its system requires minimum interaction with legacy systems, he says.
TransPoint's model will launch nationally in the next 60 days, Young says. The Wachovia deal also is key to strengthening the Microsoft/First Data/Citigroup venture's presence in the Southeastern region, he says.
In addition to the banking information available through Account Link, PNC Bank customers will be able to pay all of their bills electronically and actually see summaries and detailed bills from participating merchants. The system will connect Integrion's Interactive Financial Services platform and CheckFree's E-Bill and new processing infrastructure with PNC Bank's internal systems.
Pittsburgh-based PNC Bank is a founding Integrion owner. In addition to the bank's efforts with Account Link, PNC Bank's Treasury Management division recently signed an agreement to wholesale CheckFree's E-Bill product. (Ed Neumann, Farragut Group, 202/530- 1150; Laurinda Wilson, CheckFree 770/840-1608; Ralph Young, TransPoint, 612/841-6165.)
CheckFree Maintains "Top Spot
For consumer bill pay services banks are mostly working with CheckFree [CKFR], a position not likely to be challenged anytime soon, says Ed Neumann, research manager at Farragut Group, a Washington- based consultancy.
"With an estimated 12 million to 19 million online consumers by 2004 and CheckFree garnering 90 percent of the market - a discounted cash flow indicates a value of $45 to $85 per share in 2000 on just the bill payment operations, " according to a March report from Deutsche Bank Research.
Deutsche analysts gave CheckFree's stock a buy rating and pegged it with a 12 month price tag of $70. CheckFree's stock was listed at $43 as of Monday, March 29.
Intuit Suit Affects CheckFree Stock In The Interim
Even Intuit's complaint against CheckFree "seeking damages and injunctive relief" has not deterred the investment firm from its stance on CheckFree's future solvency.
The complaint states that CheckFree is not complying with the terms of its April, 1998 bill presentment agreement with Intuit. In the 1998 contract, CheckFree agrees to support Intuit web-based bill presentment products with its processing services, and not to offer web-based bill presentment products of its own in certain distribution channels.
"The Intuit lawsuit has caused the company's stock price to fall, but our analysis of the legal complaint filed by Intuit concludes that CheckFree is a win-win situation.
"Meanwhile the complaint itself is an extraordinarily bullish document for CheckFree, confirming that intensive and extensive efforts are under way at both companies to use the portals in order to drive online bill payment and presentment, a major catalyst to drive users growth above current market expectations," says James Marks, an analyst at Detusche.
CheckFree released a statement in regards to the Intuit suit, stating that its contract with a high-traffic Internet aggregation site, announced in January, would not be affected and that the company would continue supporting bill presentment and payment through Internet portals, regardless of the suit's outcome. (Terrie O'Hanlon, CheckFree, 770/840-1452; James Marks, Deutsche Bank, 212/469-5948.)
[Copyright 1999, Phillips Publishing]
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