The Hillsboro, Ore., banking technology vendor Corillian Corp. took a big hit in the first quarter when its largest Internet banking implementation project was delayed, but it also picked up a prominent customer for fraud detection: Citigroup Inc.
Corillian announced in July that the Charlotte banking company Wachovia Corp., which is upgrading its Web site, had agreed to use Corillian's Voyager software. Though Wachovia changed its home page last month, it has not yet changed the site's behind-the-scenes software and does not expect to begin testing it until later this year.
Doug Caldwell, a Wachovia spokesman, confirmed Thursday that it has slowed the implementation, because of the need for "additional testing."
But Alex Hart, Corillian's president and chief executive, said in a call to analysts Wednesday, "Despite that unanticipated adjustment, we had a decent quarter."
Corillian's first-quarter net income dropped 64% from the same quarter a year earlier, to $654,000. Revenue fell 4%, to $11.2 million. Mr. Hart said both its net income and its revenue would have been half a million higher if the project had been on track.
The Wachovia delays have also affected the Norcross, Ga., online bill payment processor CheckFree Corp. Since July, Wachovia has been converting its bill payment customers from a system developed by Marshall & Ilsley Corp.'s Metavante Corp. but to a CheckFree one. However, CheckFree said last month that the conversion, originally scheduled to be completed in the first quarter of next year, will not be complete until June of next year and will contribute little to CheckFree's earnings until then.
During the conference call, Mr. Hart announced that Citi agreed in the first quarter to use Corillian's Fraud Detection System, though the New York banking company has not purchased the Voyager online banking software.
"Citigroup represents our first non-Corillian Voyager customer to license the Fraud Detection System," Mr. Hart said. And even though it was a small deal in dollar value compared with its online banking ones, "we're thrilled to have a relationship with them right now."
The Fraud Detection System is designed to spot criminal activity by monitoring the behavior of visitors to an online banking site. It can identify people who view pages in a manner that is inconsistent with that of people performing transactions or researching banking products, which may indicate someone who is planning to create a fake bank Web site as part of an online scam.
John Kraft, an analyst with the investment firm D.A. Davidson & Co. in Great Falls, Mont., said that the delay in Wachovia's implementation shows Corillian's "reliance on big projects." However, "nothing's going away," he said. "Things aren't completely falling apart."
Mr. Kraft, who owns Corillian stock, also said he was pleased with the Citi deal. "It would be such a big win if they could get Voyager, their Internet banking platform, into Citibank." But he conceded that "Citibank has, in the past, shown no indication of wanting to do that."
Corillian announced March 31 that it would spend about $20 million in cash and stock to buy InteliData Technologies Corp., a Reston, Va., online bill payment software company that has been facing financial woes. The deal is expected to close by June.
Over all, Corillian's results were disappointing, "but I don't think things are as bad as they appear on the surface," Mr. Kraft said. "The acquisition of InteliData should provide some comfort."
Ariana-Michele Moore, an analyst at the Boston market research firm Celent Communications LLC, said that Citi is one of the banking companies most often targeted for online fraud. "This is a big step for Corillian, to get a client like Citibank behind them," she said.
George Tubin, a senior analyst at TowerGroup Inc., a Needham, Mass., unit of MasterCard International, said Corillian had little control over Wachovia's installation schedule, or over how that project would contribute to earnings.
"Wachovia is doing a very big project that's beyond online banking," and for Wachovia, "it's more important to do it right than to do it on time," he said.
Mr. Tubin agreed that the Citi deal is especially significant for Corillian. "That's a great marquee name for them to have, especially in the space of security and fraud detection, because, generally speaking, that stuff is not advertised."
