A new company is taking aim at Checkfree Corp.'s billing empire.
Internet Payment Exchange wants to roll out a system early next year that would reverse the economics of electronic bill payment and presentment. The exchange's formation is to be announced today at the National Automated Clearing House Association's Payments '99 conference in Atlanta.
The venture, known as IPAYX, would provide revenue to originating banks- those that collect electronic payments from retail customers. Currently, most of these banks pay processors like Checkfree to execute bill payments on behalf of their retail customers.
"Our business model is significantly different from Checkfree's," said Douglas E. Braun, president and chief executive officer of the Clifton, Va., start-up. The goal is to make electronic billing "a money-maker for banks, not a money loser."
Originating banks would get a per-transaction fee of about 1 cent on bill payments they send through the system, he said. Originators would essentially be paid for conditioning retail customers to pay bills electronically.
Electronic payments are far cheaper for concentrator banks, which assemble bill payments on behalf of corporate customers and post them to their accounts. Concentrator banks, which earn fees from the corporations, would pay the network about 6 cents per transaction for the benefit of getting payments electronically. IPAYX would keep the spread between this fee and the 1 cent paid to originator banks.
The cost-balancing is similar to that of regional automated teller networks, also known as electronic funds transfer switches.
Both banks in a transaction would need to have hardware and software that costs about $15,000.
"I'd love to see these guys succeed because we do need some competition in this area," said Steve Ledford, senior vice president of Global Concepts Inc. in Norcross, Ga.
For electronic presentment of bills, IPAYX plans to develop an Internet directory of billers and make it available to users of its switch for an as-yet-undetermined fee. Having a universal identifier for each biller, which also directs where that biller wants remittance data sent, would be a welcome development, said Avivah Litan, research director at GartnerGroup in Stamford, Conn.
However, Ms. Litan said she doesn't view IPAYX as a clear winner for bill presentment and payment. "They're still a third party," she said. "The banks really want to own this process."
IPAYX has talked to several banks about using the service but has no agreements. To break even, it said, it must get about a million consumers into the system, which is expected to cost $5 million to roll out.
The new company draws upon considerable industry experience.
Mr. Braun is the former head of Braun, Simmons & Co., which supplied the software that became the framework for Integrion's Interactive Financial Services system. Co-founder Joseph S. Pendleton 3d worked for many years in electronic banking at Meridian Bancorp of Reading, Pa., which was acquired by CoreStates Financial Corp. and, later, First Union Corp.