Spectrum LLC is working toward deploying its second-generation billing system, even before its first-generation system is rolled out, the bank utility told BTN at press time.
The new system-hoped to be in place by September-will be based on the Interactive Financial Exchange (IFX) technical model in lieu of the Open Financial Exchange (OFX) model, with which Spectrum started. As part of selecting IFX, Spectrum's owner banks awarded a prestigious software joint development contract to Alltel Information Services and Intelidata Inc.
The vendors displace Just In Time Solutions Inc., San Francisco, and Cambridge (MA) Technology Partners, which headed the OFX-based effort. The duo put in place OFX-enabled bill presentment for Spectrum's three founding banks last November, and they were expected to make OFX-based bill payment available to all Spectrum banks as BTN went to press last month. Additionally, Just In Time had been tasked with certifying all system users, a role Alltel will assume when the IFX system rolls out.
Asked about the vendor switch, Spectrum acting CEO Liam Carmody says, "When software houses are finished writing software, their role ends. It's not a marriage."
As of early April, Carmody could not say how many members Spectrum has. It's not clear how many contracts will be finalized, with the 11 banks announced late last year to have signed letters of intent, or with a further 14 banks that subsequently signed letters of intent. Letters have been signed by Mellon Financial Corp., M&I Marshall & Ilsley Bank and Wachovia Corp., among others.
Chase Manhattan Corp., First Union Corp. and Wells Fargo & Co. founded Spectrum last June. Carmody, a principal in Ridgewood, NJ, consulting firm Carmody and Bloom, has been its interim CEO since last July.
The contract is a coup for Alltel and Intelidata. The pair was chosen from an original list of 50 companies, 19 of which submitted Requests For Proposal, Carmody says. Asked if Spectrum chief rival CheckFree Corp. or EDS Corp. were contenders, as had been reported, Carmody says only that the contestants were "very big names in software development-not processing companies." M&I Data Services, Milwaukee, a major bill processor, told BTN that it did not bid on the deal. Carmody adds that Spectrum's wish to base the billing system on the UNIX operating system narrowed the field.
Alltel and Intelidata will write and support software for Spectrum's switch. Conceived as something akin to the automated teller machine network, Spectrum is intended to pass bills and payments between participating banks, much as the ATM networks handle the routing and authorizations of transactions while leaving other aspects, such as ATM card issuance and management, up to the banks. For example, banks will make their own arrangements with software vendors that present bills on the bank's Web site, whether an institution's own bills or those of merchant customers, and banks will handle much of the customer interface.
The transaction flow between banks will be orchestrated by Alltel and Intelidata. Similar to an ATM switch, the billing switch will validate transactions, and route, settle and log them. Mike Steely, director of e-business solutions with Alltel, says that "The switch makes sure the transaction makes it to the right party and back." There are much greater auditing capabilities in IFX than in OFX, he also notes.
IFX Will Prevail
Carmody emphasizes that the IFX/OFX distinction is more a practical matter than a question of one technical standard versus another. For example, he says, "Confirmation to consumers that the bill has been credited (which OFX does not provide) is hugely important." The richer billing data that IFX enables is critical to billers, he adds. Another advantage of IFX is that it makes it easier to direct remittance information straight to a biller's accounting system, allowing companies to determine who has paid what. "It's easier to flag problems with IFX," Steely adds.
Carmody stresses, "OFX was never designed for electronic bill presentment and payment. It was designed for minimal exchange of information with personal financial management packages."
Although the IFX specification was published only in January, Alltel has been working with prototypes since early 1998, Steely says. The Little Rock, AK, firm has also created software to translate OFX into IFX and vice versa.
While Alltel has a distinguished history in systems development and software maintenance, it also offers "hands-on experience in electronic billing through Intelidata," Carmody says. Intelidata's Bill Warehouse software schedules bill payments and allows the bank to separate "on us" payments from others. The Reston, VA, firm also processes bill payments and other transactions.
Alltel sub-contracts Intelidata for the Spectrum project, Steely says. The two created an electronic payments network that would allow banks to settle bill payments directly with one another. The first fruit of their labor came late last quarter when Hawaii's three biggest banks began direct bill settlement.
Spectrum is searching for a permanent CEO, so Carmody is unsure how long he will remain in his role. About a dozen of his employees are dedicated to the Spectrum project, along with staff at the founding banks, Alltel and Intelidata. "We're moving ahead methodically and relentlessly," he says "...not quite as fast as Internet speed, but a lot faster than bank speed."