|To: Benny Baga who wrote (95)||2/16/1999 12:37:00 AM|
>>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> biz.yahoo.com
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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|To: AugustWest who wrote (109)||2/25/1999 8:32:00 AM|
|From: Benny Baga|
hmmm...........kind of quiet here.....Oh Can- na - da!,....|
....well it's all the Janet Reno's fault, she is Bill Gates Evil Twin out to get him...
...Today bill gates upgrades his famous banker dinosour comment, Bill says.."Bankers are dinosour's...with blinders on".
Benny(just letting off some steam.)
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|To: AugustWest who wrote (113)||3/8/1999 8:06:00 AM|
Barron's On FDC|
From: Henry Niman Date: 3/6/99 Time: 5:30:35 AM Remote Name:
March 8, 1999
Piece of the 'Net
First Data wants a cut of all e-commerce
By BARRY HENDERSON
First Data Corp. chief executive Ric Duques has a modest goal: Every time you pay for something without cash, he wants First Data to get paid. And as more and more transactions move through the Internet, he wants a little piece of each one as they fly through cyberspace. That's not just for the stuff that's getting sold via the 'Net these days; he's got his eye on all those paper bills that you now receive by snail mail. If First Data can get a foothold in the nascent business of "electronic bill presentment," the stock market may concentrate more on its future growth potential than its past missteps.
First Data already processes nearly one of every three credit-card transactions, or four billion transactions totaling $300 billion in 1998. The company also is a major processor of checks and owns Western Union, which has become the 800-pound gorilla of the money-transfer business.
But the company also has stumbled in the past couple of years, with a rocky merger with First Financial Management in 1995 and a few disappointments in its core card-processing businesses. As a result, the stock trades at 38, or 22 times estimated 1999 earnings. That's a significant discount to the average price-earnings multiple of 33 on the S&P 500, and a sharp contrast to the 30% premium First Data stock once commanded.
Electronic bill presentment is the first prong in Duques' plan to cash in on the 'Net and to restore the company's growth. Here's the no-nonsense pitch he gives to phone companies and anybody else that stuffs your mailbox with bills each month: Sending bills the old-fashioned way costs about $1-$1.50 apiece. Duques thinks he can do it for about 30 cents with an online bill-payment system. His product is called TransPoint, which allows customers to read their statements online, hit a button, and debit the correct amount directly from their bank accounts.
It doesn't take a supercomputer to figure out why Duques is so excited. According to Dove Associates, there are 14 billion bills mailed out every year. If electronic bill presenters charge 30 cents apiece for their service, that works out to $4.2 billion. If First Data could capture 10% of this market in five years, that works out to be an additional $420 million. Of course, this assumes that everyone that gets bills will pay them on the 'Net, which is unrealistic. Even so, what if one-half of all bill payers want to do business on the 'Net? Half of $420 million would still be a hefty fillip to revenues of $5.1 billion last year.
To get there from here, Duques enlisted a partner: Microsoft. Steve Ballmer, Bill Gates' right-hand man, was enthusiastic, he says. According to Duques, Microsoft's interest was piqued because it saw electronic bill presentment as the first "real application" for the 'Net that had mass appeal. Duques claims Microsoft is pulling out all the stops to make it a success. "They told me they put the 'A' Team on it," he says proudly. The service is being beta-tested through May, and a summer rollout is scheduled.
Once Microsoft was on board, Duques also got Citibank to take a minority interest (between 10% and 20%) in TransPoint. Notwithstanding Gates' characterization of banks a couple of years ago as technological dinosaurs, Duques says that for customers to embrace electronic billing, banks need to be involved. "You have to have an intermediary in there that the customer trusts," he says. Duques says he's also asked Gates to back off on the anti-bank rhetoric. "I got him to promise me not to make any more dinosaur comments," he laughs.
For this to work, Duques says two things have to happen right off the bat. First, he's got to sign up enough billers to give him an edge with consumers. "If I tell you that I've got a service where you can pay eight out of your 10 bills online, you'd probably say, 'Okay, I'll give it a try.' " If it's only one bill out of 10, most people would pass. First Data has at least 30 billers signed up, and 26 of those will participate in the pilot program.
The other absolute necessity: Flawless customer service. If customers have no problems with the service, or problems are taken care of immediately, the word-of-mouth from early adopters will be positive.
First Data hopes to be first to market with the new system, although Duques admits that the competition won't be far behind. CheckFree figures to be the biggest competitor, and by some accounts, it already has more billers than Transpoint. There's also been some speculation from industry types that CheckFree has been in talks with a portal company like Yahoo.
Nonetheless, Duques believes there are some fairly significant barriers to entry in this business, notably the required investment, which could keep all but the best-funded companies out. Indeed, First Data anticipates a $50-$100 million investment in the system. There's also what Duques calls the "hassle factor" of setting up this business.
The second prong of his Internet strategy involves getting retail merchants wired to the World Wide Web. The bigger a merchant's presence on the 'Net, the more transactions there are to process, usually via credit cards. "Everything, 100% of the stuff that people buy over the Internet, has to be processed electronically," he says. The implications of that elude most people, including Wall Streeters. "It's kind of like what happened to Federal Express," he says. "All of a sudden, people figured out that everything that was getting bought on the 'Net had to get delivered somehow, and that Federal Express is going to get a big chunk of that business," he says. Duques thinks First Data should get similar recognition once investors see the revenue potential of its 'Net-related business.
Another part of First Data's e-commerce strategy was to take a stake in a company called iMALL, which designs and hosts Websites for retail merchants. Duques and iMALL are using a number of tactics to get the merchants hip to e-commerce. They've developed four Websites designed to funnel more transactions their way. First, there's VirtualApp.com2, directed to businesses that already have their own Web strategy down cold and are simply looking for credit-card processing. The second is MerchantStuff.com3, which says it supplies "all the stuff you need to start selling on the Web for one low monthly price," from creating and hosting a Website for a retailer to luring traffic with links from other iMALL sites.
There also are two shopping sites, stuffmall.com4 and stuff.com5, which get you information about a product and a link to a retailer where you buy something that requires a credit-card transaction. Merchants that are on the First Data bandwagon include FAO Schwartz, Toys 'R' Us, SkyMall, OfficeMax and bedandbath.com6. If all goes according to plan, these sites should create new sources of recurring revenues for First Data.
Things are moving ahead quickly. At the beginning of last year, First Data had 4,437 merchants signed up to use its Internet services; by yearend that number grew to 21,578. Duques believes this is just the beginning. "We've got two million merchants that use our card processing services, and I think you can get 10% of any group to try something at least once," he says. Duques gets a bit cagey about specific revenue projections, however. "We don't expect to see anything, really, from this business in 1999. In 2000, we'll see something happening in the numbers and then in 2001, it's going to be significant," he says.
So far Wall Street hasn't given Duques much credit for his Internet strategy, in part because he hasn't said much about it until now. The Street also hasn't been enthralled with the mature credit-card processing business. And it didn't help that the company over-promised last year and fell short of earnings expectations.
First Data managed only meager revenue and profit growth last year, with the top line gaining less than 2%, to $5.2 billion. Net inched up to $697 million, or $1.56 per share, from $691 million or $1.51 in 1997.
Duques notes that revenues dropped off because he sold several underperforming "non-core" businesses that he got as a result of the 1995 merger with First Financial Management. In 1998, he sold off VIPS Healthcare Information Solutions and First Image Management. This followed the 1997 sale of a credit agency called Nationwide Credit. As a result of the sales, the company had to take a $232 million writedown, which is excluded from the $1.56-per-share earnings number.
"When we did the merger in 1995, we said we love Western Union and TeleCheck. At the time we hoped the other stuff would turn around, but if it didn't we were going to sell it," he says. "The way it ended up, we bought a cow for a quart of milk and then we had to shoot the cow," he says. Nonetheless, the divestitures have cleaned up the company's focus and he's ready to move forward.
Duques still faces challenges in his core credit-card business owing to consolidation in banking. Some of First Data's largest alliance partners have been merged or bought out, including NationsBank, a major account.
While the consolidation trend in banking looked like it meant the loss of even more customers, First Data allayed some of those fears last month. Not only did it manage to hold on to Bank One's business even after the Chicago-based bank merged with First Chicago NBD, it also picked up a new credit-card processing contract from First Chicago at the same time. "The announcement erases that fear while adding the cards to the conversion pipeline," wrote James Marks, a research analyst who covers the company for Deutsche Bank. First Data said 46 million Bank One card accounts will be processed in 1999, with another 22.5 million from First Chicago.
Despite this near-term win, bank consolidation could still threaten some of First Data's credit-card business. Although Duques says he's committed to maintaining his existing relationships with banks, he's thinking about new kinds of alliances. That's because banks are a great way to gain an entree with retailers. "When a merchant comes in to set up a bank account, the bank can refer them to you for their credit-card authorization needs," says Duques. But banks aren't the only ones that have an in with merchants. Payroll-processing companies come to mind. Duques won't name names, but people familiar with his plans think he's likely to approach Automatic Data Procrssing, Paychex and others that have longstanding relationships with merchants that First Data could piggyback.
At a certain level, Duques will never be able to completely disengage himself from the banking industry. After all, banks are still the ones that issue the most cards, so they're the ones that still control who gets the processing business. For banks to outsource that function to First Data, it has to process credit-card transactions more cheaply than the banks can do it themselves.
That's where Charlie Fote, president and now chief operating officer, comes in. Widely viewed as First Data's best operating executive, with the best feel for the ins and outs of the processing business, he's now focused on controlling costs. It's starting to show up in merchant processing operating margins, which came up to 29.9% last quarter.
Even if Duques' Internet plans come to naught, and Fote can't keep margins this high, Western Union is probably worth nearly as much as First Data's current stock price, according to Greg Jackson, an analyst who follows the company for Harris Associates in Chicago. The wire-transfer business doesn't sound very sexy, and in the U.S., it's not, growing only in the "mid-single digits," Jackson says.
The real gains are coming from overseas, where the business is growing at 50% or better. Part of that owes to emigres of the former Soviet bloc countries who send money back to the old country. For instance, the influx of Russian Jews to Israel brought about a doubling in Western Union's business there last year.
That kind of growth potential has spurred a major expansion program. Western Union currently has about 55,000 agent locations, half of which are outside the U.S. Duques has a target of 150,000 over the next few years, with most of the expansion outside this country.
This is not a capital-intensive business. A new location needs only a local agent and a computer system. Of course, the challenge is to navigate local banking rules and customs, and finding trustworthy agents. But this expansion should give the business 20%-plus earnings growth for years to come.
That's what gets the Harris Associates analyst excited. Jackson thinks Western Union alone is worth 14 times EBIDTA [earnings before interest, taxes, depreciation and amortization], or $11 billion, which works out to $25 a share. (For another valuation of Western Union see table.) He reckons the rest of the company is worth at least $25 a share, which gets him to a target stock price of $50.
Of course, Duques thinks there's lots more to like at First Data than just Western Union. "At the end of the day, we want to do more business than anyone on the Internet," he says. An immodest goal, indeed.
URL for this Article: interactive.wsj.com
Hyperlinks in this Article: (1) interactive.wsj.com (2) virtualapp.com (3) merchantstuff.com (4) stuffmall.com (5) stuff.com (6) bedandbath.com
Last changed: March 07, 1999
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|To: AugustWest who wrote (114)||3/8/1999 10:20:00 AM|
>>>>First Data hopes to be first to market with the new system, although Duques admits that the competition won't be far behind. CheckFree figures to be the biggest competitor, and by some accounts, it already has more billers than Transpoint. |
Simple...hopes to be first to market...on the planet Kyrpton.
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