Wednesday, January 30, 2008

The Compliance Challenge

By Mark Brousseau

If compliance challenges make you feel like a hamster running on a wheel, you’re not alone. Compliance costs grew significantly faster than net income for the financial institutions in a recent survey by the Deloitte Center for Banking Solutions. While compliance spending as a percentage of net income for the financial institutions surveyed were 2.83 percent in 2002, by 2006 it had grown to 3.69 percent, the survey of top 50 banks found. The indirect costs of compliance management are much greater, but more difficult to precisely measure.

The Deloitte Center for Banking Solutions also found that as costs have risen, financial institutions appear to have responded more by applying people to monitor compliance rather than focusing on process improvement and technology to manage it.

For instance, 95 percent of the financial institutions surveyed said their executives were much more involved in compliance management than in the past, with 40 percent saying that the time devoted to compliance had increased by more than 25 percent.

What do you think? E-mail me at

Monday, January 28, 2008

Lost Data A Worldwide Affair

By Mark Brousseau

If you think the challenges associated with securing sensitive data are confined to the United States, think again. The International Herald Tribune reports that Britain’s tax and customs service lost banking and personal data of 25 million people – nearly half the country’s population – when two computer disks went missing in the mail in November 2007.

The disks were sent to a government audit office through an internal postal service and weren’t tracked. They were missing for three weeks before the loss was reported. The disks contained details of more than 7 million families in Britain who claim a child benefit – a tax-free monthly payment available to everyone with children. The information on the disks included parents’ and children’s names, along with addresses, dates of birth, national insurance numbers and banking details. What do you think? E-mail me at

Choose New Hires Wisely

By Mark Brousseau

When hiring, it’s hard to be sure what you’re getting.

But in the January issue of US Airways Magazine, career coach Donald Asher offers the following recommendations to keep from being blindsided by a resume liar.

First, trust your gut. Then, back up your gut decision with good old-fashioned rational verification. Asher writes that there are four things any hiring authority should verify for new hires: education, title, dates and salary. For instance, Asher keeps a list of accredited colleges and universities handy. If a school a candidate claims to have attended isn’t there, that’s a big warning flag, he says. Asher also suggests tracking down people who are not provided as references by the applicant and asking them for “off the record” information.

Finally, Asher recommends not telling other candidates that you’ve hired someone until the new employee has worked a full week on the job. This could save your company a great deal of embarrassment. What hiring tips can you pass along? E-mail me:

Thursday, January 17, 2008

Just In: Goldleaf Financial Solutions Acquires Alogent Corporation

ATLANTA--(BUSINESS WIRE)--Jan. 17, 2008--Goldleaf Financial Solutions, Inc. (NASDAQ: GFSI), a provider of integrated technology-based solutions designed to improve the performance of financial institutions, today announced the acquisition of Atlanta-based Alogent Corp. ("Alogent"), a leading provider of enterprise deposit automation technologies for global financial institutions, for a total consideration of approximately $42.5 million, consisting of $32.9 million of cash, funded by the company's expanded line-of-credit, a $7.0 million convertible note at $4.50 per share, and $2.6 million in common stock.

The merger combines two industry leaders that both have a long history in the market. It strengthens Goldleaf's leadership in converging payments, allowing the company to expand market presence, extends its customers base and creates significant cross-selling opportunities. Goldleaf now has 81,000 deposit automation touch points, in addition to more than 25,000 ACH endpoints, which showcases its deep penetration in the financial services market. With this acquisition, Goldleaf also expands its strong partnership channels, with companies including NCR, Information Technology, Inc. (ITI) and Unisys. Approximately two-thirds of the company's revenue is now generated by its market leading, high-growth payment solutions.
According to Lynn Boggs, CEO of Goldleaf Financial Solutions, "This acquisition benefits every financial institution that can now leverage electronic payments at every point of presentment across its enterprise. With an 18-year history in the market, from our beginning in the ACH business, we believe we have shaped a global understanding of where the market is going. That knowledge lets us proactively address the needs of financial institutions, delivering quality products and services across all spectrums. This merger solidifies our position as the leader of converging payments and a driver of innovation."

This acquisition enables Goldleaf to lead the transition to electronic payment convergence through innovative product design, easy to deploy solutions and deep domain expertise for financial institutions of all sizes. With market leading products in more than 3,500 financial institutions, Goldleaf is a trusted partner whose solutions allow its customers to increase profitability while improving operational efficiencies.

Alogent was founded in 1995 to address check and item processing system optimization. The company's success has been predicated on working with financial institutions to reduce the cost associated with processing paper transactions, leverage new technologies and electronic efficiencies to transition from paper to electronic processing and improve customer service by reducing customer transaction errors. Alogent's clients include global 50 financial institutions in the U.S. and Europe, including four of the top 25 U.S. banks - HSBC, JPMorgan Chase, KeyBank and SunTrust.

Acquiring Alogent complements the company's recent additions of Community Banking Systems (CBS) and DataTrade, LLC. Alogent will become a business unit of Goldleaf, with members of the executive management team remaining with the company. Friedman, Billings, Ramsey & Co., Inc. acted as financial advisor to Goldleaf in connection with the transaction. Financial Technology Partners LP and FTP Securities, LLC (together "FT Partners") served as exclusive strategic and financial advisor to Alogent and its board of directors in this transaction.
"This transaction provides a natural extension to our business and the additional scale enables us to take our products into virtually every corner of the marketplace," said Brian Geisel, CEO of Alogent. "The culture, vision and philosophies of our companies are complementary and our management team is excited to have this opportunity to enact change and continue making significant contributions to further drive converging payments in the market."

The following is a forward-looking statement and actual results may differ materially from those discussed below. The Company's outlook includes the effect of all acquisitions completed to date. Further, this outlook does not give effect to any additional potential mergers or acquisitions that may be consummated subsequent to the date hereof.

The Company anticipates achieving pro-forma revenues for the full year 2008 of approximately $87 million and pro-forma EBITDAS for the full year 2008 of approximately $15.0 million. These pro-forma revenue and EBITDA projections include the impact of purchase accounting on the company's revenue and deferred revenues as well as certain costs and charges related to the merger.

Friday, January 11, 2008

Expect Branch Capture Renaissance

By Mark Brousseau

Jeff Vetterick (, executive vice president of marketing at Myriad Systems, Inc., thinks the ‘next big thing’ in distributed capture may be an old topic: branch capture. “Although branch capture preceded merchant capture by several years, it never took off like merchant capture has,” Vetterick told me this week. “Some banks just couldn’t see the incremental operations improvements that branch capture offers. But what merchant capture has done is show banks how powerful distributed capture can be.”

Also working in branch capture’s favor is that many banks now have imaging and distributed capture deployments – and the associated software and hardware infrastructure – on which to piggyback. “I see a renaissance or second, much larger wave of branch capture building across the market,” Vetterick said, adding that Myriad Systems has been selling branch capture solutions to community banks “left and right. We’ve just closed a bunch of deals.” He expects mid-tier and large banks to start jumping on this trend as well, “big time. Banks that have bought into merchant capture are now turning their attention to branch capture.”

Vetterick said the debate about front or back counter branch capture still exists, with back counter capture remaining the least obtrusive to bank operations and workflow. Unless it is integrated with the bank’s branch automation system, front counter capture is “kluge and clunky” and creates problems associated with not being able to talk to the host, he said.

What has been resolved, at least to Vetterick, is that ASP will continue to see tremendous growth in the branch capture space; more banks view ASP as a more appealing option than spending big bucks on an in-house system or giving up control and outsourcing the work.

What do you think? E-mail me at

Thursday, January 10, 2008

Production Scanning Still Hot

By Mark Brousseau

Don’t let the growth of workgroup and distributed scanning fool you – there is still a need for production scanners, particularly among companies implementing shared services organizations. That’s according to Mark Fairchild, senior vice president, technology portfolio management, at BancTec, Inc. Fairchild noted that many shared services programs begin with financial business processes, but expand to include general document processing.

Demand for production scanners is particularly strong in the accounts payable space, Fairchild told me, where manufacturers, utilities and retailers, among others, are looking to automate invoice processing. Meantime, declining check volumes has created an opportunity in the financial services arena for scanners that can handle documents and checks comingled, he said.

Not surprisingly, Fairchild says BancTec continues to see growth in its high-speed scanner sales, with financial services and educational testing companies and service bureaus leading the way. The draw? Reductions in labor and customer service costs, and improved quality.

What do you think? E-mail me at

Tuesday, January 8, 2008

Market Slowdown in 2008?

By Mark Brousseau

Fifty-eight percent of those responding to a recent TAWPI Question of the Week said they had an optimistic outlook for the economy in 2008, while 42 percent of respondents said they didn’t (note: those responding in the positive did so before the recent stock market dive).

Clint Shank ( of SortLogic SYSTEMS, a division of Omni-Soft, Inc., sides firmly with the pessimists. “In this election year, a lot of what we’ll see is the same as what we’ve seen these first few weeks of January, and that’s a lot of volatility. There’s been a significant drop in the stock market, and that’s telling,” Shank told me. “A lot of people aren’t comfortable with how things might work out; how stable their job is, as an example.”

“In our market, we could see a slow down because of the volatility,” Shank said. “Good, bad or indifferent, market volatility will affect the banking market as users pull back and wait to see how things turn out with the economy and the election. There’s a sense that there could be a change of parties in the White House, and that would bring new tax rules and guidelines, among other things. Banks will want to see what happens before making big investments.”

“I personally don’t think this is going to be a great year for vendors,” Shank said. “I think next year, if the new presidency gets off to a good start, we could see more of an up tick.”

What do you think? E-mail me at

Improving Document Design

By Mark Brousseau

If you’re trying to eliminate payment exceptions, you may want to take a fresh look at the design of your remittance document, recommends Craig Bjork (, director, account & business development, Data Capture Services, for CDS Global.

Bjork offers the following tips:

… Keep it simple for the customer. “Many exceptions come from customers not understanding how to properly return a document, not to mention the importance of doing so,” Bjork told me. “If information is requested of the customer, or there are options for returning the document, give customers clear instructions and ample room to respond.” Bjork also recommends providing constrained areas for customer responses.

… Make sure the remittance document fits properly in the envelope you provide. “If documents are too large, customers will fold them, creating processing inefficiencies and potential sorter jams. If the documents are too small, you will have mail delivery issues or play in the envelope that will trip up your processing equipment,” Bjork noted.

… If the front of your remittance document is too busy – and there isn’t enough clearance for accurately reading the scan-line – consider putting the customer account number/scan-line on the back. “This isn’t the best option, but it is an alternative,” Bjork said.

… Check your document paper stock. “Documents on light weight paper stock can create reflective issues during the scanning process, which can cause mis-reads or no-reads,” Bjork said. A minimum of 24 lb paper is usually recommended.

Bjork’s colleague, Lesa Brooks (, general manager, West Region, Data Capture Services, for CDS Global, told me that billers should also be sure that their document design is within the specifications for the processing equipment that they or their outsource provider use. Some areas to check: form size, font/printing, reply envelope construction, placement of folds, the strength of perforations, and the paper finish. Brooks said promotional attachments – such as stickers and slip-ins – are probably not a great idea.

Do you have any document design tips to share? E-mail me at

Market Consolidation Predicted

By Mark Brousseau

Watch for more lockbox market share consolidation this year as declining check volumes put an even greater strain on lockbox service providers, in-house remittance operations and lockbox solutions vendors alike. That’s according to Serena Smith (, senior vice president, Remittance Processing Division, at Fidelity National Information Services.

“We’re all keenly aware of declining check volumes and the issues this presents. As a result, I believe we are going to see even more acquisitions, more consolidations and more companies moving into new markets,” Smith told me, adding that Fidelity expects an increase in the number of banks and billers looking to outsource their remittance processing. “Every processor, whether it’s an in-house operation or an outsource provider, is feeling the decline in check payments, in terms of higher unit costs and equipment maintenance fees,” Smith said. “As part of this trend, more lockbox providers will look to offer additional services to replace their lost check volumes – such as healthcare payment processing – and add technologies to try and capture some of the ‘new’ electronic payments volumes.”

Which brings us to the trends in technology that Smith foresees in 2008. She says more corporate billers will require their lockbox providers to deliver a consolidated view of the transactions handled on their behalf – regardless of whether they were paper or electronic – and to provide a check image exchange file to, or for, their corporate clients.

What do you think? E-mail me at

Compliance A Major Lockbox Focus

By Mark Brousseau

Driven by more stringent internal controls and external mandates, Paul Diegelman (, vice president, business development executive, at Regulus, expects increased interest from lockbox clients in compliance this year.

“All companies rely on their internal controls, among other things, to ensure financial statement accuracy,” Diegelman told me. “Corporations are becoming increasingly focused on the task of remittance processing, to ensure that the internal or external remit processors have adequate controls in place, and that those controls are tested to ensure adequacy.”

Diegelman added that external mandates, such as HIPAA for healthcare and Regulation AB for financial services companies, are increasing the compliance requirements for internal and external processors alike.

Similarly, Diegelman foresees increased adoption of formal programs, such as ISO17799, that help control data security variables. These must include physical site access, encryption of data at rest, certain hiring policies, and penetration testing, among others, he said.

“A tremendous amount of sensitive information is managed by internal and external remittance processors,” Diegelman noted. “Looking at recent media reports, we know that breaches of this data bring significant reputation and financial risk to the holder of the data. Companies must now have some sort of documented and tested program to ensure that sensitive data is protected.”

What do you think? E-mail me at

RP Users Raise The Table Stakes

By Mark Brousseau

Payments processors will raise the table stakes for solutions providers this year, demanding more from their software than mere “scan and deposit” functionality. That’s according to Wally Vogel (, president of Toronto, ON-based Creditron, Inc., a PurePay portfolio company.

Vogel told me that processors would expect things such as interfaces to accounts receivable (A/R) systems, image archive functionality, rule-based cash application and adjustments tools, and the ability to use recognition technology to capture additional data from checks.

Meantime, Vogel also foresees no let-up in the demand for distributed capture solutions from corporate billers. As part of this trend, Vogel expects that check scanning hardware will soon become inexpensive enough to be an “off the shelf” item, like other scanners. The day is coming, he predicted, when companies will “pick up a check scanner from Staples.”

What do you think? E-mail me at

Monday, January 7, 2008

Avoid These Outsourcing Pitfalls

By Mark Brousseau

Before outsourcing your back-office operations, be sure that you have a thorough understanding of all of the costs – direct and indirect – of your current operation, as well as a complete understanding of all the costs from the outsource provider.

Many companies that consider outsourcing simply look at the unit cost of their existing operation and do not consider the impact the in-house operation has on ancillary operations, said Steve McNair (, president of FTP Consulting Services, Inc., based in Southlake, TX. McNair told me that this is the No. 1 mistake companies make when considering outsourcing.

“When considering an outsourcer, many companies do not identify all the costs associated with the service or operation being outsourced,” McNair explained. “The most commonly overlooked expenses are the staff the company must maintain internally to handle the exceptions work from the outsourcer. Other overlooked expenses are the communications and travel expenses associated with managing the outsource provider, whether they are across town or across the country.”

The most common mistake companies make after outsourcing an operation is that they forget the outsource provider requires management oversight – and often more oversight than what was required when the operation was in-house.

“Many companies do not develop the structured communications and metrics required to properly manage an outsource provider,” McNair said. “More often, companies take an ‘out of sight, out of mind’ approach. In this scenario, the communication of company’s strategy, expectations and irritations are left unsaid, causing problems to fester until the relationship is beyond repair.”

McNair said communications is a two-way street, where both a company and its outsource provider need to be pushing one another to perform. When all of the effort is one-sided, the project will inevitably fail.

“A key element of a company’s communications, should be realistic, timely and accurate metrics,” McNair said, noting that most companies scale back their benchmarking programs once they’ve outsourced. McNair said this is backwards: “The greater the distance between the company and its outsource provider, the greater the need for a metrics program that will not only monitor progress, but also provide warnings of potential problems.”

What do you think? E-mail me at

Cash Flow Forecasting Seen Lacking

By Mark Brousseau

Thirty-three percent of those responding to this year’s 2008 Strategic Treasury Survey, conducted by Treasury & Risk and sponsored by SunTrust, believe that better technology and/or more outsourcing is needed in the area of cash flow forecasting – which led all other response categories by more than 17 percent. Some 303 treasurers, assistant treasurers and vice presidents of finance responded to the e-mail survey.

The next treasury area in which respondents thought better technology and/or more outsourcing was needed was budgeting and planning/cash management (15 percent), followed by accounts payable (13 percent), financial risk management (11 percent) and working capital management (10 percent).

What do you think? E-mail me at

Healthcare Payments Still Hot

By Mark Brousseau

Without question, healthcare payments processing was one of the hottest topics in financial services in 2007, with tremendous buzz, loads of product tire kicking, and more technology implementations by lockbox providers. This year promises to be no different.

Bill Gamble (, healthcare strategic account executive for Dallas-based eGistics, Inc., believes there are two major trends to watch for this year in healthcare payments: continued adoption of automated explanation of benefits (EOB) processing solutions, and an increase in Health Savings Accounts (HSAs).

As banks become more adept at selling the benefits of automated EOB processing services, Gamble expects more of their lockbox clients to adopt the technology. “You also will see current competitors in the market target each others accounts with cheaper fees and better service,” Gamble told me. “I also expect some of these banks and service organizations to go after the 55 percent of healthcare accounts that don’t currently use bank or third-party lockbox services.”

Meantime, Gamble sees an increase in HSAs as more companies put a greater burden on employees to cover their healthcare expenses. As banks chase HSA deposits, Gamble expects a new market to rise to handle the increasing number of payments coming from these accounts. For instance, there could be a need for a service to convert paper enrollments to 834 format for payors, as well as a need to convert that information into the format banks require to set up a new account.

Underlying both of these trends, Gamble said, will be the need to archive images of healthcare documents for verification, research and customer support.

What do you think? E-mail me at