With its online bill payment and presentment contract expiring, Zions Bancorp. of Salt Lake City is switching from CheckFree Corp., the market leader, to the runner-up, Metavante Corp.
The selling point, a Zions executive said, was not features - on which providers of electronic billing service have been competing for years - but price. And that signals a big shift.
"Metavante will provide the same exact service that CheckFree was," said Michael DeVico, Zions' executive vice president of technology and operations and chief information officer. "From a feature/function standpoint, we expect no significant customer impact."
The change "was primarily driven by economics," Mr. DeVico said.
Frank D'Angelo, a senior executive vice president at Metavante and the group executive of its payments solutions group, said Tuesday that the Zions contract was the biggest win it has revealed in bill payment.
Metavante, the technology subsidiary of the Milwaukee banking company Marshall & Ilsley Corp., entered the bill-payment market in 2002 by buying a foundering Spectrum EBP LLC.
Mr. DeVico emphasized that he was not unhappy with CheckFree - "They've done a good job for us," he said - but said price could not be ignored.
More and more consumers are now paying their monthly bills online. Nearly a third of the almost 300,000 online banking customers of Zions' six banks pay bills online., Mr. DeVico estimated. Those numbers have been surging, he said; online bill payments grew 77% last year through one of its banks and 45% through another.
The switch to Metavante's system will take place in phases and should be complete by midyear, Mr. DeVico said.
Gary R. Craft, the chief executive of the San Francisco research firm Financial DNA LLC, said the Zions-Metavante contract may be a sign "that the market is moving toward a commodity model."
CheckFree has long been the dominant provider of electronic bill presentment and payment services for banks. It is known for software and features that have helped its customers enroll users, but it is not considered cheap.
Mr. Craft said the arrival of a less-expensive alternative that seems able to match CheckFree on features and win on price is an important development.
With volume increasing and banks spending heavily to promote their online bill-pay services, they now trying to reduce their own bills, Mr. Craft said. "Banks are going crazy on this ad spending, and that puts pressure on the vendors," he said.
CheckFree, of Atlanta, did not respond to requests for comment.
Frank D'Angelo, a senior executive vice president at Metavante and the group executive of its payments solutions group, said Tuesday that the Zions deal demonstrates his company's success in creating a bill-pay service that can challenge CheckFree's.
Though Metavante did not announce the deal, Frank Martire, Metavante's president and chief executive, mentioned it in passing on Jan. 13, during M&I's earnings call.
Mr. D'Angelo said that ABN Amro Holding NV is also is using Metavante for EBPP in this country, though that deal also remains unannounced. Representatives of ABN Amro and its U.S. retail banking subsidiary LaSalle Bank Corp. of Chicago did not respond to requests for comment.
Spectrum's original backers - Chase Manhattan Corp. (now J.P. Morgan Chase & Co.), First Union Corp. (now Wachovia Corp.), and Wells Fargo & Co. - were never able to turn it into a major force in the bill-payment market. Metavante incubated Spectrum's technology in-house and reintroduced it a year after buying the venture.
Beth Robertson, a senior analyst with TowerGroup, the Needham, Mass., market research unit of MasterCard International, put CheckFree's bill-payment volume at 50.7 million a month early last year, and Metavante's at 12.5 million.
The Spectrum banks have taken different approaches since selling off the system they developed. Wells runs its system in-house, receiving e-statements not only from Metavante but also from CheckFree and from Princeton eCom, the No. 3 provider.
In contrast, Wachovia announced plans in July to switch all of its online bill-payment to CheckFree from a mixed system it was then using.
JPMorgan Chase did not respond to requests for information.
Metavante, long a leader in core processing and check processing for small and midsize institutions, made several acquisitions last year that significantly expanded its payments capabilities, including those in new areas such as electronic funds transfers and digital check imaging.
Among those deals were the acquisitions of the Montvale, N.J., funds network NYCE Corp. and Advanced Financial Solutions Inc., an Oklahoma City provider of check image software.
In October, Metavante also announced an agreement under which Digital Insight Corp. of Calabasas, Calif. would act as a broker of EBPP service. Digital Insight was to offer its clients, mostly smaller banks, Metavante's service as well as CheckFree's.
Mr. D'Angelo said Tuesday that Metavante's wide menu helped it sell to Zions, which uses some of its other services. "That was a key element," he said. "It's been a very positive relationship. That's the definition of cross-sell."
Though he would not estimate how much business the bill-payment contract will bring, "There will be a nice uptick in volume for us," he said.
Mr. Craft of Financial DNA said the Zions contract seems to validate Metavante's diversification strategy.
"The jury was out on Metavante because they made so many acquisitions and they weren't weaving it together," Mr. Craft said. "With a major bank moving their way away from CheckFree, it looks like they may be in the hunt again."
