Spectrum LLC, the electronic bill presentment and payment consortium that started with a bang three years ago in taking on CheckFree Corp., is ending with a whimper.
People at the big-bank trio that founded Spectrum in 1999 have dropped their brash rhetoric and substituted the unanimous opinion that selling the venture to Metavante Corp. a natural move.
“This is the next logical step in the evolution of EBPP,” Sridhar Chityala, a senior vice president at J.P. Morgan Chase, said in a release when the deal was announced Monday.
A J.P. Morgan Chase spokeswoman later added the view that Spectrum had achieved its goals and that the market had matured enough that it no longer seemed necessary for the banks to run the venture themselves.
Spectrum’s “low-cost transaction-based pricing forced others to follow suit, and its open architecture also prompted other providers to be more flexible, no longer restricting financial institutions to an end-to-end outsourced solution,” the spokeswoman said by e-mail. “These results were more than worthwhile.”
In separate interviews this week, representatives of the founding banks — Wachovia Corp., J.P. Morgan Chase & Co., and Wells Fargo & Co. — used language that was sometimes notably similar in describing their rationale.
“Now that the model has been established, it makes a lot of sense for a company like Metavante, which has a lot of expertise, to take it to the next level,” said James P. Smith, the senior vice president of consumer Internet services at Wells Fargo.
Metavante is the technology subsidiary of Marshall & Ilsley Corp., a $29.1 billion-asset bank holding company based in Milwaukee and with operations in five states. Metavante said that Spectrum, an online switch built to deliver bills to bank customers from numerous billers, fit in well with its existing EBPP business.
Lawrence Baxter, a Wachovia executive vice president and its chief e-commerce officer, said of the deal, “We felt like this was the natural evolution of what we set out to achieve.”
Spectrum has taken its knocks over the years: At first it seemed to flail directionless while a CEO was sought, and then people complained it was slow to bring services to market. Mr. Baxter suggested that integration issues at the founding banks may have contributed to the venture’s problems. Not only did Chase Manhattan merge with J.P. Morgan & Co. during the Atlanta company’s brief lifetime, but First Union Corp. bought Wachovia Corp. and took its name.
“Spectrum has had to wait on us because of all our merger-related work,” Mr. Baxter said. “Spectrum is able to provide the presentment feeds. We’re just not able to take them at this point.”
Of the three founders, Wachovia is taking the most measured approach to online bill presentment. Mr. Baxter said his company plans no push before 2003, while executives work through other issues stemming from the First Union/Wachovia merger, which was consummated last year.
Most important, he said, is that the company plans to convert all its checking accounts from the two legacy banks on to a single computer system beginning in November. “We’re being very careful not to add any functionality” to the system till then, he said.
In the meantime, Mr. Baxter expressed confidence that customers will be satisfied with Wachovia’s existing service, which lets customers send money to billers electronically without receiving the statements over the Internet. The Charlotte, N.C., company has about 500,000 retail and small-business customers enrolled for e-payments, he said, and 60% to 70% of them are active, paying about two million bills a month online.
He said it would be 12 to 18 months before demand for presentment reaches a point that people would switch banks to get the service.
Some customers are receiving bills online now under an arrangement with Atlanta-based CheckFree that predated the merger, Mr. Baxter said, but the bank is not marketing the service to new customers now.
When Wachovia does begin to promote presentment, he said, probably sometime late next year, it will store the bills in a Wachovia warehouse, using software it licensed from InteliData Technologies Corp. in May.
That will enable the company to receive online statements both from the Spectrum/Metavante switch, from CheckFree, and potentially from other providers, such as the MasterCard Remote Payment and Presentment Service. Mr. Baxter said Wachovia would use “least-cost routing” to direct payments back to the billers at minimum expense to the bank.
In bringing the bill warehouse in-house, Wachovia is pursuing a plan similar to the one announced in June by Wells Fargo, which decided to consolidate e-billing content from several providers for its presentment service.
Mr. Smith said Wells now has about 100,000 customers viewing bills online, “quite a high number of customers at this point. The penetration rate is ahead of where we expected it to be.”
Relatively few billers are providing statements through the online hubs, but “it’s clear to me there is going to be tremendous consumer growth in the next couple of years,” Mr. Smith said.
The J.P. Morgan Chase spokeswoman, Kristin Batteria, said in an exchange of e-mails that Morgan Chase also will continue to work with Metavante, CheckFree, and the MasterCard service to present electronic bills through its Chase Bill Management Center.
Separately, Metavante said Wednesday that it had wrapped up its purchase of Paytrust Inc., a privately held New Jersey company that provides outsourced bill presentment for Citigroup Inc. and American Express Co., among others. The deal was announced early in July.
Citigroup’s e-consumer business CEO, Antony Jenkins, said in a press release, “By completing the Paytrust acquisition and acquiring the Spectrum switch, we believe Metavante will help lead and drive momentum in the bill presentment and payment marketplace.”
