Banks have eagerly adopted online bill payment to deliver customer payments to billers, but some are exploring ways to use the software for processing more types of transactions.
Though this movement beyond basic bill-pay services is still in the early stages, it may catch on because it can help banks lower their costs for processing some payments.
The trend may have been a factor in the acquisitions of two payment vendors in the past couple of weeks. On Aug. 18 the online banking software vendor Corillian Corp. bought InteliData Technologies Corp., which offers a payment warehouse. One customer, Frost National Bank, is developing account-to-account transfer features based on the InteliData online banking software, and plans to use the same application to process intrabank loan payments.
Six days before the InteliData sale closed, the banking technology provider Fiserv Inc. announced it had completed its purchase of BillMatrix Corp., which uses direct connections to billers to offer last-minute payments to consumers.
The Frost National Bank subsidiary of Cullen/Frost Bankers Inc. of San Antonio has long used InteliData's payment software. Bobby Berman, a group executive vice president at Frost, said the vendor touts its technology "as a payment warehouse, but it's really a transfer warehouse."
Until February, InteliData had hosted Frost's payment service, but Mr. Berman said that during that month Frost took the software in-house to gain more control of its customers' data - and to do more with that information.
Mr. Berman said that in addition to routing these payments, the information stored in the warehouse could be used to send direct account-to-account transfers across the automated clearing house network.
Several banks offer transfer features, but typically they let customers either send money to their own accounts at different banks or to customer accounts within same bank. Mr. Berman said Frost is modifying the InteliData software to route transfers between different customers' accounts at different banks, which should be available by yearend.
Frost also plans to bring other types of transactions into the warehouse. The next project, perhaps to begin in 2006, will be to use the same warehouse to route Frost customers' payments for loans issued by the banking company. These on-us transactions would be considered intrabank transfers rather than a payment to a biller.
Using bill-payment software as a centralized payment center to route different types of transactions would lead to "greater efficiency and much better customer service," he said. "From one spot we can see where your payments are going," without having to check numerous payment systems to locate a transaction.
Corillian president and chief executive Alex Hart said that 28 of the nation's top 100 banks use either InteliData's Interpose payment warehouse database or Corillian's Voyager warehouse, which is part of the Portland, Ore., vendor's online banking system.
However, he said that most banks use the warehouse applications only for basic record-keeping and transaction execution, not for more advanced functions such as segregating out on-us payments that can be settled within the bank.
The acquisition of InteliData will help Corillian encourage banks to offer more innovative payment features, Mr. Hart said in an interview Tuesday. "There hasn't been a single vendor with the capability to support that as effectively as we can today."
Fiserv, of Brookfield, Wis., says it can use BillMatrix to build its own online payment business.
"There are a lot of different flavors of bill-pay. They don't all do the same thing," said Norman J. Balthasar, a senior executive vice president of Fiserv and its chief operating officer.
BillMatrix, of Dallas, specializes in processing "expedited payments" on behalf of billers, executing last-minute transactions by using direct connections to 120 billers. "It's a niche market, but it's a large niche market," Mr. Balthasar said.
Fiserv plans to let BillMatrix continue marketing its services to its biller clients, and will also offer the services to Fiserv's customer banks, Mr. Balthasar said. These banks could use the service to accept last-minute payments on loans, or could incorporate the BillMatrix connections into their own online bill-payment service that customers would use to initiate payments to other billers.
Bruce Cundiff, a research analyst at Javelin Strategy and Research of Pleasanton, Calif., said Fiserv and Corillian are trying to round out their product selection and grab a larger piece of the growing market for routing payments. "They're trying to have a truly full-service offering."
