HSBC Holdings PLC is working with the cash management technology vendor Fundtech Corp. to consolidate its global payment systems.
The plan, which has been in the works for more than two years, is to have a single system handle the London banking company's high-value payments and crossborder automated clearing house transactions.
Executives of HSBC, the world's third-largest bank, said that the company plans to move to a Fundtech system in the United States next year and that they hope to have the rest of the consolidation largely completed by the end of 2007.
With Internet cash management systems becoming more common and more powerful, many corporate treasurers can now track their payments more closely, sometimes in real time.
One of their more frequent requests of banks has been for systems to help them keep tabs on high-value transactions and currency exchange transactions, said Bandula Wijesinghe, the senior vice president who heads HSBC's payments transformation program.
"Customers are asking for quite a range of services," Mr. Wijesinghe said in an interview last week. "They expect a seamless system where they can hand their payments to us in the U.K. and expect us to handle them worldwide." HSBC offers those services now, but the movement of payments is "not ideal," he said.
HSBC has three high-value payment centers - in Dover, Del.; London; and Hong Kong - and each runs its own payment system, Mr. Wijesinghe said. It operates in 60 other nations, using another system, and over the years it has bought several banks that have their own payment systems.
"We want to consolidate all that into one payment system, so we can make payments anywhere, any time, from a single point within the group," Mr. Wijesinghe said.
HSBC is using Fundtech's Global PAYplus software. Michael Sgroe, the Jersey City company's president and chief operating officer, said the HSBC contract was one of the three largest in Fundtech's history and the 10th sale of that product. Fundtech also counts Citigroup Inc. as a customer.
Fundtech announced the HSBC agreement last week, after the bank had completed a high-volume stress test to make sure its system could handle the expected transaction load. The contract was signed in December, contingent on Fundtech's achieving several performance-based milestones; the stress test was the last.
HSBC began evaluating vendors in March 2004 after an 18-month review of its operations.
Mr. Wijesinghe said the company also discussed whether it would be more economical to build a payments network in-house.
The conclusion was that "it would be feasible to build it, but it would take a longer time than if we bought it," Mr. Wijesinghe said.
"With Fundtech, we had a good fit."
The U.S. center will be the first to switch to the new system, in 2006. The London and Hong Kong sites are scheduled to switch by mid-2007, and most of the 60 other, smaller systems are to move over by end of that year, Mr. Wijesinghe said.
Dan Schatt, a senior analyst in the retail banking group at Celent Communications LLC of Boston, said banks "are recognizing that technology can play a role in transforming the payment process into a strategic asset, where before it was just a cost center.
"It creates the opportunity to provide a higher level of service to the customer. Payments themselves can be competitively differentiated."
Fundtech said last week that it expects its fourth-quarter revenue to beat the guidance it gave in October, though earnings for the period are expected to be in line with the October projection of 5 to 7 cents a share.
It expects to post revenue of $17 million, which would top the third quarter by 20%. The October guidance was for revenue of $14.7 million to $15.4 million.
Fundtech is scheduled to report its fourth-quarter and full-year earnings on Feb. 15. For 2005 it expects revenue to increase 18%-21%, to about $70 million.
