Bisys Group Inc. is outsourcing its automated clearing house processing to eFunds Corp. to attract business processing payments for a relatively new type of medical savings account.
The New York financial outsourcer also named a new head for its troubled insurance business last week.
William W. Neville, the group president of the information services unit, said Bisys is working with eFunds, of Scottsdale, Ariz., to offer new services to the 1,450 banks and other financial companies for which it provides data processing.
One of the things Bisys is doing, according to Mr. Neville, is connecting its customers to eFunds' Connex ACH system. He said the system would help Bisys land clients in the burgeoning market for health savings accounts, a new type of tax-free savings account that consumers can use to pay for medical expenses.
Bisys is connecting customers to the eFunds ACH system because it hopes to process large transactions from employers, which fund the accounts on behalf of their workers through direct deposits, he said. "We needed more of an industrial strength solution to handle the volume."
The service, which is available now, also lets consumers pay for medical services and products, including nonprescription drugs, using a special debit card.
"We theoretically will be handling hundreds of thousands of payments a month" through the service, Mr. Neville said.
Michael Feliciano, a senior vice president at eFunds and its division executive for electronic payments, said the new system provides processing for a continuous flow of individual transactions, rather than a few large batches.
"Think of it as a batch of one" transaction, he said. "That's a huge enhancement," over systems like Bisys' previous in-house system.
Mr. Neville said Bisys has already signed contracts to provide processing for two large health plan administrators, which he would not name.
He anticipates that the service will enable Bisys to attract the large trustee banks that act as custodians for the medical accounts. "I know it will bring us new business. The community banks that we work with today will have the ability to offer HSAs as well."
The ACH contract is an extension of a June 2003 agreement under which eFunds provided automated teller machine and debit card processing services to Bisys' bank customers.
Bisys has also begun to offer its banks access to fraud- and risk-management services offered by eFunds' Chex Systems Inc. for use in opening accounts. Frank Carauna, a marketing manager in eFunds' risk division, said more than 9,000 banks use the system to check the identities of new customers, but only a handful of Bisys' bank customers use it.
Also last week, Bisys announced that it has appointed John M. Howard as the president of its insurance services division. Mr. Howard, who will join Bisys this week, was the president of Prudential Financial Inc.'s Prudential Select Brokerage, where he oversaw the third-party distribution of life insurance and specialty products.
The life insurance business has been troublesome for Bisys this year. In June it was forced to restate its earnings going back to 2001. The writedown of more than $100 million was to correct overestimates of sales commissions at insurers it had acquired over the past several years.
Carla N. Cooper, an analyst at the brokerage firm Robert W. Baird & Co., said the developments reflect Bisys' strategy of improving its outsourcing capabilities.
"They've embraced an outsourcing platform for the different products and services they provide to banks," Ms. Cooper said. "It's logical for Bisys to provide ACH on an outsourced basis."
The appointment of Mr. Howard beats the Thanksgiving target date Bisys had set for filling the insurance position, which had been vacant since April.
"I think it's a positive that they have filled that hole," said Ms. Cooper, who has a "neutral" rating on Bisys' stock. Its other executives lack insurance experience, she said. "There's no substitute for having been around the block a couple of times."
