Two of the three largest U.S. companies that specialize in scanning paper bills so they can be paid electronically announced a merger deal Tuesday.
Their agreement seems to signal that the two-year-old industry is stuck in the same rut as the rest of the electronic bill payment and presentment business.
Under the deal, Paytrust Inc. of Princeton, N.J., would acquire PayMyBills.com of Pasadena, Calif. The price was not disclosed.
The enlarged Paytrust would be positioned against CyberBills of San Jose, Calif.
Paytrust and PayMyBills offer very similar services. They arrange with billers to receive all of a consumer's invoices, either electronically or on paper. When the bills arrive, Paytrust and PayMyBills notifies the consumer by e-mail. The consumer can view the bills and pay them online.
Paytrust and PayMyBills charge the same fees: $8.95 a month for the first 25 transactions, 50 cents each after that.
The companies have also been trying to sign up financial institutions as clients, with some success. PayMyBills has E-Trade Group Inc., and Paytrust has GE Capital Network and American Express Co.
Edward G. McLaughlin, chief executive officer of Paytrust, said the deal is not just about size.
"What used to happen," he said in an interview Tuesday, "is that organizations that evaluated scanning technology would always come back to looking at our two models. This merger makes it easier for them, by not forcing them to make a choice."
PayMyBills and Paytrust had been flirting with a possible merger early this year but dropped the idea after deciding that each would be better off independent.
"The [financial] markets were very different then," said John Tedesco, co-founder and CEO of PayMyBills. "We thought that we could go our own routes."
In March, Paytrust filed for an initial public offering; PayMyBills had similar plans. But the climate soured, and Paytrust withdrew its IPO. In June, the two companies resumed merger talks.
The deal is expected to close by October.
Mr. McLaughlin would retain his current position, as would Flint Lane, Paytrust's chairman and president. Mr. Tedesco would become chief strategy officer. Mr. McLaughlin said Paytrust has not determined if anyone would be laid off as a result of the merger.
Paytrust has 30,000 customers, but Mr. McLaughlin and Mr. Tedesco would not say how many PayMyBills has. Neither would disclose the deal price.
In the past, companies like Paytrust and PayMyBills have claimed a competitive advantage from being able to present both paper-based bills and electronic bills to consumers. Most electronic bill providers only present electronic bills.
But a merger deal involving two of the top three scanning companies so early in the game may be a sign that the market is not taking off as quickly as hoped, said Avivah Litan, a research director at GartnerGroup, a research and consulting firm in Stamford, Conn.
"If you have an active market, you have room for three players," Ms. Litan said. "This is evidence that the market is not active."
Paul Jamieson, senior analyst for banking and payment services at Gomez Advisors of Lincoln, Mass., said the deal would help Paytrust compete against CheckFree Holdings Corp., the predominant company in electronic bill payment and presentment.
CheckFree is developing a person-to-person payment service with Bank of America. PayMyBills already has such a service - PayMe.com - and the post-merger Paytrust would seek to integrate it with the rest of its bill management offering.
"We see that as a natural extension of what we are providing," Mr. Tedesco said. "What we are doing is creating an e-payments product that allows all of the consumer's payments to be done in one place."
Mr. Jamieson said integrating a person-to-person payments engine into its bill management service could give Paytrust the push it needs in the race with CheckFree.
"Person-to-person payments is a hot space," Mr. Jamieson said. "On top of what Paytrust already offers, this will make them stronger in competing with CheckFree."