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To: Benny Baga who wrote (95)2/16/1999 12:37:00 AM
From: AugustWest  Read Replies (1) of 126
>>call the company ePay, have two shares float, a few banner adds on Yahoo, USAToday.. and go on CNBC a few times. The stock would explode.

So maybe someone heard you<g>

Any opinions?

Fed taps small firm for EFT translation software(dated 5/98)

The Federal Reserve System has hired a small but rapidly growing developer of electronic payment software, Bottomline Technologies of Portsmouth, N.H., to custom-make a piece of software that is expected to help member banks comply with the U.S. Treasury Department's Electronic Funds Transfer '99 initiative.

EFT '99 mandates that all federal payments - Social Security benefits, tax credits, and payments to companies for products and services - be made electronically.

Bottomline's software will help the Treasury Department and payee banks fulfill one aspect of EFT '99: payments for products and services which are attached to an automated clearing house file, according to Robert Allen, vice-president of the Federal Reserve Bank of Kansas City, who is chairman of the Fed's EDI (electronic data interchange) Work Group.

The Fed will distribute and help deploy the package, expected to be called FedEDI Software, to some 12,000 financial institutions who are connected to FedWire during the third and fourth quarters of this year. Fed-sponsored regional training seminars are also expected to be announced in September 1998.

Whether the payment is made via e-mail, fax, or an ASCII format, FedEDI Software is supposed to help banks and their customers make sense of exactly what the payment is for—something which is not always clear, says Bottomline's vice-president of marketing, Phil Grannan.

Big boost for tiny firm

Calling Bottomline a "surprise" winner of the Fed's contract, DuWayne Peterson of Standards Testing Assurance Corp., Pasadena, Calif., says it's clearly "a tremendous endorsement" for the company, "putting it on the map as a player, giving it a lot of running room." Peterson, who formerly held posts as chief of Security Pacific Automation Corp., and executive vice-president of operations, systems, and telecommunications for Merrill Lynch, says it makes FedEDI Software a potential "de facto standard"—and signals "a vote of confidence" for Microsoft Windows NT.

How then, did a little company, with not much more than $20 million a year in revenue, started a few years ago by Dan McGurl (ex-IBM and State Street Bank) and Jim Loomis (formerly of The Nashua Corp.), land such a deal—a sale, if not necessarily lucrative, than certainly a powerful lever for exponentially boosting its Paybase brand EFT software way beyond its installed base of 2,500 corporate and bank customers?

"Our biggest criteria was the software's technicality and functionality to translate these EDI messages," Allen says. "We wanted it to be PC-based and work on a variety of platforms" including Microsoft's DOS and Windows.

The Fed's EDI work group sent out a request for proposal to which 30 companies responded, among them the largest suppliers of EFT software. The work group then tested seven company's products, Allen says, in what he characterizes as an "exhaustive evaluation."

Was price a consideration? "Yes," Allen says. The Fed wants to be able to price FedEDI Software "extremely reasonably," helped by spreading the product's licensing fee the Fed charges "over a large base of users." No precise fee, however, has yet been determined.

Long-time coming; a lot on the line

The Electronic Funds Transfer 1999 initiative emanated from 1996 legislation which called for the federal government to accelerate its ability to make payments—and have them understood by recipients—electronically, according to Allen. But the banking industry at large is not presently well prepared to successfully use electronic data interchange over the ACH network.

"The truth of the matter is that fewer than 1,000 banks currently have the capability to pass on remittance information to corporate customers, federal agencies, and independent banking agencies," says Allen. Out of the 1,000, Chase Manhattan, Norwest, Banc One, First Union, and NationsBank account for 40% of all ACH transactions, according to data compiled by American Banker.

But there's more to the Fed's action than meets the eye. "This has been under way for 20 years—to create a checkless, electronic society," Peterson says. What's really at stake is nothing less than the viability of the U.S. banking system, he believes.

"Companies can go company-to-company and bypass banks. Meanwhile, banks want to own the payment system. The Fed wants to be above it all and say, ‘we support banks, but we want efficiency, and want money flow to be as riskless and liquid as possible,' and they [the Federal Reserve Governors] are nervous" about the banking system's ability to achieve that level of efficiency.

"Fewer than 1,000 banks can pass on remittance information to corporate customers, federal agencies, and independent banking agencies"

—Robert Allen, Federal Reserve Bank of Kansas City

By Alan Levinsohn, managing editor


"Reprinted by special permission from the May 1998 issue of ABA Banking Journal.
Copyright 1998 by the American Bankers Association."
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