Payments Help Banks Keep Clients, SunGard Says

It's not just a banker thing — electronic payments are cool, and customers agree enough that they are willing to stay with a bank that has a good-enough payments setup.

SunGard says that the demand for electronic payments is so strong that 45% of the 171 companies it surveyed in late 2011 and early 2012 would switch banks over payments. This seems to be the case with at least one of its bank clients, Mitsubishi UFJ Financial Group's Union Bank. The San Francisco bank uses SunGard's PayNetExchange and says the payments technology has helped it retain clients.

"In my time as product manager over the payables, I can honestly say we never lost a client, at least not to another bank … we've certainly never lost to a competitor," says M. Ray Hurley, a vice president and senior product manager at Union Bank. He has held his position for two years; the bank has been a SunGard client for four years. The ability to electronify payments that were handled by check "has really opened a lot of doors," he says.

If companies switch from checks to a virtual card SunGard offers, they earn rebates for their spending each month. In theory, SunGard says, this could earn the company more money than it spends on payments (SunGard would still profit from transaction fees). "We have not had that yet," Hurley says, but turning payments into a revenue generator "is a very odd concept for a company to wrap their head around."

From most companies' perspective, "treasury products cost money," says Rob Jacobson, senior vice president of payment services for SunGard's AvantGard business. "With this product, it actually becomes a revenue source for the [accounts payable] department."

Twenty-five percent of companies surveyed say they make more than 10,000 payments a month, and 35% say they pay more than a thousand vendors. SunGard published its study April 30.

But turning a profit from payments at companies is not simple, says Aaron McPherson, a practice director at the Framingham, Mass., research firm IDC Financial Insights.

"The issue is getting the suppliers to accept it," he says. If the suppliers do not also serve consumers, they may not be equipped to accept credit cards or other types of electronic payments.

Even if the suppliers are interested, they may not want to commit to one vendor's technology, McPherson says.

"There's so many different electronic payment networks for [business-to-business transactions] that I think part of the problem is they're so fragmented," he says. "PayNetExchange has to compete with … all these other things that are out there."