Spectrum LLC, a bank-owned venture that seeks to put banks at the center of the electronic bill payment and presentment business, took a long-awaited step forward on Monday when it announced it had selected two vendors to build its service.
Outsourcer Alltel Corp. will take the lead role in managing software development for Spectrum, a joint venture of Chase Manhattan Corp., First Union Corp., and Wells Fargo & Co., while Intelidata Technologies Corp. will provide its bill payment products and expertise.
The announcement by the nine-month-old venture comes weeks after Checkfree Holdings Corp. strengthened its already dominant hold on the bill payment and presentment market by merging with its rival Transpoint and just as new competitive threats are beginning to flare.
"Spectrum is finally making a move in terms of building a payments infrastructure, but they have a long way to go, and the competition is just now starting to heat up," said Avivah Litan, an analyst at Stamford, Conn.-based GartnerGroup Inc.
Sources say that M&I Data Services and MasterCard's Remittance Processing Service will disclose their ambitions in presentment and payments shortly. And Total System Services Inc. recently announced the formation of DotsConnect, a new company that will focus on the electronic payments market, including bill payment and presentment.
The companies are vying for a spot in a market comprised of the approximately 17 billion consumer bill payments made annually. GartnerGroup predicts that 15 million U.S. households will pay their bills electronically by 2002, while one in every four consumers will have their bills delivered - or presented - electronically by 2004.
Spectrum has been feeling pressure to bring a tangible service to market, Ms. Litan said, and the pressure increased last month with the Checkfree-Transpoint announcement. Spectrum still is seeking a permanent chief executive officer.
"It is the bank's market to lose," Ms. Litan said. It is important for the industry to move more quickly, she added.
Spectrum is progressing on the schedule it outlined last year, said Liam Carmody, the group's interim chief executive officer and president of Carmody & Bloom, a payments systems consulting firm based in Ridgewood, N.J. The Spectrum banks currently are exchanging electronic bills, as planned. For example Wells Fargo customers can receive mortgage bills online from First Union.
The original schedule also called for the ability to let customers pay some presented bills by this spring. By the end of this year, the ability to "pay anyone," even those recipients that do not have electronic connections, is to be in place.
Mr. Carmody said Spectrum has not rushed to build a service quickly, lest haste cause mistakes. "In the Internet world, people put technology together and worry about the details later," Mr. Carmody said. "Well, we can't do that here." Failed payments become "a very big deal because it damages the relationship with the bank and the credibility of the program," he said.
So far, more than 11 financial institutions have signed letters of intent to participate in Spectrum, including Michigan National, Comerica, First Tennessee, HSBC USA Inc., Mellon Financial Corp., Marshall & Ilsley Bank, Summit Bancorp, and Wachovia Corp.
The Alltel-Intelidata partnership was one of nine entities to submit a bid in response to Spectrum's request for proposal issued late last year and was identified by American Banker three weeks ago as the dark-horse candidate for the job.
The duo beat out three other finalists, whose identities were not revealed. Spectrum was said to be in talks with iPlanet (formerly the Sun-Netscape Alliance) and Electronic Data Systems Corp.
"Alltel gave us a truly excellent proposal," Mr. Carmody said. "We thought they had the right combination of technology development skills and experience."
Little Rock, Ark.-based Alltel and Reston, Va.-based Intelidata teamed up in December with the specific goal of winning Spectrum's business. Alltel Information Services, the financial services division of the telecommunications parent, has a 30-year history of providing core data processing to banks and it counts the three Spectrum owners as customers. Intelidata has offered electronic commerce payments software since its formation in 1990.
Mr. Carmody said Spectrum still has not decided which vendors it will use to provide pay-anyone services. "We are looking at a range of possibilities," he said.
Spectrum is making a major commitment to Interactive Financial Exchange, a standard that would replace the more widely adopted Open Financial Exchange standard, Mr. Carmody said. OFX, a standard hammered out by Checkfree, Intuit Inc., and Microsoft, does not provide the level of detail that billers want, such as how to apply prepayments of mortgages.
"We talked to a lot of people in the vendor community and it came out that not only is IFX superior to OFX, but it may even be needed in order to achieve widespread adoption of EBPP among both billers and consumers," Mr. Carmody said. "We feel we are making a technology decision for the next 10 to 15 years."
Michael Steely, director of electronic business at Alltel, said that the adoption of IFX could become problematic in the near term. Alltel, however, has been working on a prototype for the last year.
"We have already done some work with Intelidata on a translation mechanism between OFX and IFX, so I think Spectrum has moved in the proper direction of really supporting both" standards, Mr. Steely said. He added that the vendors still could serve those banks "that are really entrenched in OFX."
