With a second major technology deal this year, CheckFree Corp.s plans to become a more diversified provider of payments capabilities have taken shape.
The Atlanta online bill-payment company said Wednesday it agreed to buy Corillian Corp., one of the top vendors of online banking software. That followed a January deal for the check imaging software vendor Carreker Corp.
Analysts said the acquisitions would turn CheckFree into a better-rounded provider of electronic payments services and make it more similar to its nearest competitors, which have also expanded, often through acquisition, to offer a broad menu of capabilities.
Buying Corillian is a very significant shortcut to where wed like to go on our own, Pete Kight, CheckFrees chairman and chief executive, said during a conference call on the Corillian deal.
Despite CheckFrees dominance in the bill-pay market, the overall market for financial technology products and services has evolved, and vendors that can deliver multiple services are now viewed as having an advantage.
Gwenn Bezard, a research director at Aite Group LLC of Boston, said that CheckFree may not have needed to expand into online banking now, but it would have had to do so eventually.
Today, they dont need Corillian, but this deal is not so much about today. Its about tomorrow, Mr. Bezard said. Its more about where theyre going to be five years from now, because the competitive environment has been changing and vendors need to be able to bring more to the table.
CheckFree and Corillian, of Hillsboro, Ore., have several overlapping product lines, including a bill-payment warehouse database and online personal financial management software.
However, neither has products that compete with the others core offering; CheckFree has no online banking product, and Corillian only resells the online bill-payment capabilities of CheckFree and its rivals.
Steve Olsen, CheckFrees chief operating officer, said in an interview that by merging his companys products with Corillians, CheckFree will be able to offer a more comprehensive set of financial applications & that are better integrated.
Merging the products will make banks online banking and bill-pay services easier to use, Mr. Olsen said. He said that one of the challenges we have today is a split in the experience, which requires online banking customers to go to one part of their banks Web site to see payment details and another part to view a summary of their transactions.
CheckFree hopes to develop an integrated check register that is active, Mr. Olsen set. That would allow people to call up payment details directly from the transaction summary instead of going to a separate page.
Combining online banking and bill payment would also make data flow behind the scenes more easily, which would mean faster bill payments and a smarter antifraud mechanism, Mr. Olsen said.
Alex Hart, Corillians president and CEO, said his company has had similar frustrations. We both have reached the logical limits at times because of the lack of the ability to integrate completely, he said.
CheckFree said it would pay $245 million, or $5.15 a share, for Corillian. The deal is expected to close June 1.
Mr. Bezard noted that several other payments vendors have joined forces in the past year. Last week, Intuit Inc. bought Digital Insight Corp. and promised to turn components of the buyers popular financial management software into Web applications that could be sold as online banking tools. Intuit, which was previously known mainly for its personal financial management software and tax preparation applications, is acquiring the transaction processing software vendor Electronic Clearing House Inc.
In July, Online Resources Corp. gave its bill-payment capabilities a substantial boost by buying a rival, Princeton eCom Corp.
However, Mr. Bezard also noted that the acquisition wave in the payments market will bring CheckFree and its rivals into more direct competition with a different segment of the banking technology market. Core processing vendors, such as Fiserv Inc. and Fidelity National Information Services Inc., have a long history of expanding through acquisition, and also offer a variety of payments capabilities.
The more CheckFree expands its own product line, the more it will resemble these other vendors, Mr. Bezard said. At the end of the day, the big competitive threat that CheckFrees facing is from core processors, he said.
