In 1995, when Great Britain's Lloyds Bank and TSB Bank merged to become Lloyds TSB, Brian Geisel was launching his own venture-an Atlanta software business known today as Alogent Corp. Soon after its inception, Alogent snagged a contract with Lloyds, which wanted to streamline the paper handoffs that were dominating payments processing at the bank.

Now, six years later, Alogent aims to create a niche at home by helping large American banks manage workflows in a hybrid payments system. Geisel sees real opportunities for Alogent in the United States, since banks have been struggling for more than a decade to build a case for wide-scale adoption of electronic check presentment (ECP). ECP has been a bit of a joke in the U.S., he says.

In theory, ECP is designed to eliminate paper flows associated with check clearing. But ECP can have a down side; while paper and work processes are eliminated on the check clearing cycle's front end, these often are eclipsed by paper to electronic reconciliation processes required on the back end. That's because most ECP programs today require that when checks are converted and sent through the clearing cycle as electronic files, they eventually must be bundled together (about a day or two later) and physically transported to paying banks. Paying banks then must match the paper to electronic files before transactions are posted to individual customer accounts.

Even internally it has been tough for U.S. banks to make the transition to true electronic collections and posting-a situation that grows more complex as large banks expand nationally through mergers and acquisitions. There are a lot of banks today that are national in scope, geographically, that still can't clear (electronically) across geographic boundaries, explains Steve Ledford, executive vice president of Atlanta-based Global Concepts Inc. It's hard to find a single system that matches what (one of these banks would need) across an entire network, he says.

But Alogent seems to have accomplished the mission. Its suite of client-server based products support data capture and transmission at the branch level, reconciliation and reporting required in the back office, and associated linkages that must be established for disparate legacy systems in a merged environment.

It's what I'd call a coexistence strategy, says Jim Godesh, executive vice president of International Consulting Inc., a Virginia- based bank technology consultancy that specializes in image and transaction processing. The idea is to migrate from CPPS or IPS (the legacy check processing systems from IBM and Unisys) gradually, versus the big bang effect.

Greg Schratwieser, president of ICI, says Alogent faces some struggles, largely due to the disparities between American and U.K. markets. But Schratwieser says he's seeing a lot of interest in Alogent among large U.S. financial institutions. It's difficult to ignore them, says Schratwieser, who recently lost one of his consultants to Geisel. Robert Coyan was hired away from ICI to head up marketing at Alogent, and, according to Geisel, will lead the company's efforts to add large U.S. banks to its customer ranks.

Geisel's expertise in workflow management led to the deal with Lloyds TSB, which tapped Alogent in 1995 for installation of Sierra Clearing for image-based exception checks. Today, Sierra Clearing takes care of the bank's front-end branch operations, while reconciliation and reporting in the back office are supported by Alogent's distributed software product, Sierra Clearing, and a workflow product Alogent calls eList. The solution makes use of special data-matching algorithms developed by Alogent, according to Geisel. Our goal is to eliminate manual data entry, he says.

Alogent has delivered an exceptional product, chosen as a core component of our mission-critical program to merge the two banks, Lloyds and TSB, says Jo Palmer, projects director for group operations at Lloyds TSB Group, the bank's operations arm. Palmer, who describes the relationship with Alogent as a partnership, says the program took just two years to complete, from initial development to finished implementation. The project, dubbed Integrated Outclearing Program (or IOP), involved changes to every aspect of the bank's operations, she says.

Lloyds processes an average 2.5 million checks a day, or just under 1 billion checks a year. But unlike U.S. banks, which are charting slow but steady increases in checks, check volumes are declining in the United Kingdom. Recently, Lloyds TSB, Barclays Bank and a check utility service operated by Unisys Corp., announced a joint venture strategy that addresses cost considerations of declining check volumes through an outsourcing arrangement called iPSL. The Alogent Sierra Clearing platform is a key asset we bring to iPSL, says Palmer.

The question that remains to be answered, however, is can Alogent move its success into the U.S. marketplace? Dick Poje, president of R.J. Poje and Co., a consulting firm in Barrington, IL, suggests a good starting point would be a large U.S. bank that has expanded nationally through mergers and acquisitions.

Many of the largest banks today create the illusion of interstate banking by using on-us ACH transactions to move funds between disparate demand deposit account (DDA) systems. It's a user- transparent cash concentration that makes it look like your old accounts are actually being deposited with Bank of America. But in fact, they are still being deposited into legacy DDA systems, then transparently transferred to the BofA core system, explains Poje, who has consulted with many of the nation's largest banks. A system of the type developed by Lloyds and Alogent could replace physical funds transfers with a combination of ECP and electronic check collection (ECC), with book transfers between the due to/due from accounts of each DDA system, on an intra-day basis, Poje says.

Geisel estimates a $5,000 per branch start-up cost for a bank implementing Sierra Clearing to support branch capture of check data.

Susan Skerritt, a partner at Treasury Strategies Inc., a Chicago- based consultancy, says Alogent's alliance with Lloyds should bode well for finding a large American bank partner in the future. We've seen similar kinds of alliances between banks in the U.S. and small technology firms to develop Web-based applications, Skerritt notes. She suggests large banks would have difficulty working with large software houses on a project of this type. They are looking for a savvy, technologically-oriented partner that is not saddled with the hierarchy of a bank.

Geisel is banking on this approach, and the market seems ready to give Alogent a chance. Many payments companies have fallen on hard times as market funding has slowed to a trickle in the technology sector, yet Alogent recently secured a $2 million investment from Southeastern Technology Fund, a venture capital fund specializing in technology companies in the Southeastern states. The investment represents Alogent's first round of outside funding.

Geisel says he's excited about the commitment from Southeastern to help fund his company's expansion in its home country. As the dominant payment software provider in the U.K. market, we are now aggressively taking our expertise and development to the U.S. payments market, he says.

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