Thursday, April 30, 2009

e-Payments Deliver Cost Savings for Utilities

Posted by Mark Brousseau

Meter reading, billing and payments were the top opportunities for customer service cost savings identified by the 300 utilities surveyed by UtiliPoint International.

The interchange fees for utilities accepting credit card payments easily exceed $200 million annually, UtiliPoint International found. But the majority of utilities with more than 100,000 customers do not pay a dime of this $200 million in annual interchange fees because their customers are charged a small fee to offset interchange.

In addition to saving money on interchange fees, many utilities can also save money by sending their customers a bill that is easier to read, the survey found. More than 15 percent of calls into the call center are from customers who do not understand their bill. Clearly laying out the most important details of the bill (amount due, date due, account number) can reduce utilities call center expenses or allow current call center employees to work on other projects, notes UtiliPoint International.

What do you think? Post your comments below.

Wednesday, April 29, 2009

Plan Now for a Pandemic

Posted by Mark Brousseau

The very real possibility of a swine flu pandemic should be a wake-up call to the many organizations that have not developed a plan to cope with widespread employee illness, according to CCH, part of Wolters Kluwer Law & Business.

To reduce the impact on operations, employees, customers and the general public, it is important for all organizations that haven't done so to begin continuity planning for a pandemic now, CCH says.

Unlike natural disasters or terrorist events, an influenza pandemic would be widespread, affecting multiple areas of the U.S. and other countries at the same time. A pandemic would also be an extended event, with multiple waves of outbreaks in the same geographic area; each outbreak could last from six to eight weeks. Waves of outbreaks might occur over a year or more.

"A pandemic could affect as many as 40 percent of the workforce during periods of peak illness. Employees could be absent because they are sick, they must care for sick family members or for children if schools or day care centers are closed, or they are afraid to come to work," said CCH Workplace Analyst Heidi Henson, JD. "Lack of continuity planning can result in a cascade of failures as employers attempt to address challenges of a pandemic with insufficient resources and employees who might not be adequately trained in the jobs they will be asked to perform."

In 2007, the CCH Unscheduled Absence Survey revealed that only 27 percent of companies reported that they had a plan in place in the event that a large percentage of employees become ill. This was almost a 100-percent increase over 2006, when only 14 percent of companies surveyed had such plans, however, it still represented just over one in four organizations.

"In 2007, there was heightened awareness of the need for pandemic planning because of concern over a possible avian flu pandemic," Henson noted. "That outbreak never materialized; hopefully organizations have continued to develop plans in the meantime."

In establishing a plan to cope with a possible pandemic, organizations must address the phenomenon known as "presenteeism," which occurs when employees show up for work sick. This can have a significant and costly impact on an organization, not only in terms of risking the spread of disease, but also in terms of diminished productivity, quality and attention to safety.

"We all know what it feels like to have the flu - you're not operating at 100 percent, you may not even be operating at 50 percent," said CCH Employment Law Analyst Brett Gorovsky, JD. "The bottom line for most organizations is that it's in everyone's best interest for sick workers to simply stay away, even in normal times."

"Employers need to discourage both the 'hero employee' - and even more so, the 'hero boss' - who try to muddle their way through the day when they shouldn't," said Gorovsky. "Employees are sensitive to the differences between what management says and what it means, and when they see their supervisors coming in sick, they're convinced that's what's expected of them also."

Organizations that build pandemic plans may also help address their everyday presenteeism issues.

"As part of developing a pandemic plan, organizations need to thoroughly examine all their practices and procedures," said Gorovsky. "Many organizations that take these steps will then roll them out as part of their overall HR practices, making sure they're adequately addressing employee illness, whether it's just a mildly severe flu season or a serious pandemic."

CCH recommends the following basic steps to prepare for a pandemic:

... Identify a pandemic coordinator or team with defined roles and responsibilities for preparedness and response planning;
... Identify key employees and key work processes required to maintain business operations during a pandemic;
... Establish (or review) an emergency communications plan;
... Seek up-to-date information from local and state health and emergency management resources; and
... Remind employees to get in the habit of washing their hands often and cover their mouths and noses when they cough and sneeze.

What steps is your organization taking to prepare for a potential pandemic? Post your comments below.

Tuesday, April 28, 2009

Swine Flu Triggers Legal Questions

Posted by Mark Brousseau

Business managers following swine flu's (H1N1 influenza) spread and monitoring government advisories should prepare to handle difficult legal issues triggered by an escalating epidemic or worst-case pandemic scenario, says New York litigation partner Kenneth W. Taber, head of Pillsbury's Disaster Planning and Liability Management Team, which advises the City of New York and other clients on emergency and disaster response plans for natural disaster, epidemic, terrorism and other crisis scenarios.

"Epidemics pose particularly difficult issues because unlike a hurricane or terrorist bomb, the scope of impact is not immediately clear and changes rapidly," Taber explains. "Compared to asking when a fire can be extinguished or electricity restored, diseases present companies with more complicated questions, such as whether they can lawfully demand employees provide proof of vaccination, bar sick employees from the office or compel healthy -- but fearful -- staff from reporting for work."

Taber adds that even well-intentioned companies seeking to accommodate employees' concerns and assist health authorities can inadvertently incur liability if they distribute medications, for example. They can also run afoul of provisions in the Health Insurance Portability and Accountability Act (HIPAA) and Americans with Disabilities Act (ADA) if certain health records are improperly shared or flu-infected workers allege discrimination. He notes that some organizations, such as federally-supported universities and government contractors are subject to different regulations apart from other areas of the private sector.

Because disease outbreaks are difficult to identify and contain quickly and can persist over time with varying effects, Taber advises clients to take an integrated approach to planning for all manner of related business disruptions, from reduced staff levels to constricted supply chains, missed deadlines and service failures.

"After addressing their top priority of human health and welfare, organizations have to look at what could happen in adverse impact; if an offshore parts supplier or service provider is in a particularly hard-hit region and incapacitated or if the company itself is unable to serve customers due to an epidemic -- liabilities and legal implications could vary," Taber explains. "Quarantines can cause significant disruptions. Clients need to determine whether they will follow voluntary quarantines affecting their workforce, or how tightened border screening of potentially contaminated goods and travelers will affect their logistics and business travel requirements. These questions are best asked in advance, before costly delays and interruptions force the issue."

Taber recommends that organizations routinely review, revise and test their emergency response plans to ensure they reflect both changing needs of the organization and accepted risk and compliance levels.

"Epidemics lead many businesses to cancel travel and encourage employees to work from home -- putting higher demand on computer systems and IT staff as a result," he notes. "Unless management has adequately planned for and practiced secure tele-commuting, there could be data privacy risks if employees are untrained on following office technology policies outside their cubicles or use improperly configured laptops -- these are hard problems to fix once employees are stuck at home."

What do you think? Post your comments below.

Swine Flu Highlights Need for Supply Chain Resilience

Posted by Mark Brousseau

The current Swine Flu outbreak highlights the need for supply chain resilience.

INSIGHT, Inc. notes that with the Swine Flu, natural disasters, or terrorist plots constantly in the news these days, companies must be prepared for business disruptions by having in place an overall risk management and resilience plan. Companies must perform rigorous analysis of their supply chain network to uncover its vulnerabilities and manage risk, INSIGHT says.

"Supply chain teams need to immediately analyze their supply chain networks for the potential impact this risk may have on their company, customers, and trading partners," said Jeff Karrenbauer, president of INSIGHT, Inc. "These issues impact corporate survival and highlight the need for assessing supply chain vulnerability as a factor in business continuity planning."

What steps is your organization taking to prepare for a potential flu pandemic? Post your comments below.

Monday, April 20, 2009

Increased Fraud During Economic Crisis

Posted by Mark Brousseau

Intense financial pressure during the economic crisis has led to an increase of fraud, according to a survey of fraud experts conducted by the Association of Certified Fraud Examiners (ACFE). The survey also found that layoffs are leaving holes in organizations' internal control systems.

More than half (55.4 percent) of respondents said that the level of fraud has slightly or significantly increased in the previous 12 months compared to the level of fraud they investigated or observed in years prior. Additionally, about half (49.1 percent) of respondents cited increased financial pressure as the biggest factor contributing to the increase in fraud, compared to increased opportunity (27.1 percent) and increased rationalization (23.7 percent).

“The message to Corporate America is simple: Desperate people do desperate things,” said ACFE President James D. Ratley, CFE. “Loyal employees have bills to pay and families to feed. In a good economy, they would never think of committing fraud against their employers. But especially now, organizations must be vigilant during these turbulent times by ensuring proper fraud prevention procedures are in place.”

The study also found that:

... Employees pose the greatest fraud threat in the current economy. When asked which, if any, of several categories of fraud increased during the previous 12 months, the largest number of survey respondents (48 percent) indicated that embezzlement was on the rise.

... Layoffs are affecting organizations’ internal control systems. Nearly 60 percent of CFEs who work as in-house fraud examiners reported that their companies had experienced layoffs during the past year. Among those who had experienced layoffs, almost 35 percent said their company had eliminated some controls, while 44.2 percent said the layoffs had no effect on controls and only 3.2 percent said their company had increased controls.

... Fraud levels are expected to continue rising. Almost 90 percent of respondents said they expect fraud to continue to increase during the next 12 months. Additionally, the fraud most expected to increase is embezzlement.

What do you think? Post your comments below.

Economy Causing Fraud Concerns

Posted by Mark Brousseau

Two-thirds of consumers around the world believe that the current economic crisis has impacted their personal risk for ID theft or fraud, according to research conducted by Unisys.

The current global findings of the Unisys Security Index also show that fears about bank card fraud and identity theft have increased. These areas remain the top overall consumer concerns globally, where they have ranked since Unisys began the comprehensive biannual study in 2007, and the increase in ID theft fears reverses a small downward trend. In addition, the survey saw a 10 point increase in Internet security fears worldwide, which included near equal rises in concerns about online banking and shopping as well as computer viruses and spam.

“Our research is a wake up call to every organization that serves consumers since perception is reality, and security fears are clearly growing worldwide,” said Tim Kelleher, vice president and general manager, Managed Security Services, Unisys. “Not only do the vast majority of people believe that the current global financial crisis directly increases their personal risk of being an ID theft or fraud victim, but general concerns about online transactions, computer viruses, and meeting financial obligations all saw significant increases among consumers worldwide. While the economic environment is difficult, it is more imperative than ever that businesses and governments assuage these fears by investing in unified solutions that address all their security vulnerabilities.”

“We continue to see unique nuances around the world, which can provide insight for businesses and governments when developing security solutions and communicating to customers,” Kelleher said. “Enterprises need to take a more unified approach to security and consider both common worldwide threats and trends, and how these relate locally depending on market conditions.”

What do you think? Post your comments below.

Tuesday, April 14, 2009

ABBYY's New Digs

Posted by Mark Brousseau

ABBYY recently moved its U.S. headquarters into new office space at 880 North McCarthy Boulevard in Milpitas, CA, and passed along these photos.

NACHA Payments 2009 Highlights

Posted by Mark Brousseau

On the Glenbrook Payments Views Web site, Erin McCune, a partner with Glenbrook (415-441-4840), provides the following highlights, observations, and recurring themes from last week’s NACHA Payments 2009 Conference in Orlando.

The exhibit hall was approximately one half the size of last year and many of the vendors opted for smaller booths than they’ve had in the past. There were relatively few bankers in attendance - travel budgets are tight, as is scrutiny of how TARP funds are spent ("Disney World Boondoggle!" would be bad PR indeed). This was disappointing for the vendors but great from my perspective; they had lots of time to talk to curious consultants from Glenbrook.

Here at Glenbrook we recently coined the term Payments as a Service (PaaS) to describe a growing interest among businesses (billers as well as ecommerce merchants) to outsource their payment processing (incoming and outgoing) and related functions, such as fraud analysis. At Payments 2009 we observed vendors offering PaaS services to billers as well as new capabilities that will enable banks themselves to offer more comprehensive payments support for their corporate customers. For example:

... Fiserv announced a new "convergent" payments solution that enables banks to process ACH and check payments on a common platform, streamlining and combining customer facing capabilities. This has the potential to significantly improve the silo’d product specific interfaces that consumers and businesses face when they interact with their bank. Eventually the solution will support wires, credit/debit, and CHIPS. The potential to streamline and enhance treasury services to businesses, by allowing them access to their bank’s own cross-payment portal is huge.

... The combined forces of 3i Infotech, J&B Software, and Regulus offer a comprehensive lockbox solution to banks and billers, regardless of whether they want to install software locally or utilize a hosted solution (or some combination). The solution allows billers to use one platform to generate and deliver bills (paper or electronic) and receive payments via IVR/telephone, web, walk-in, kiosk, or call centers. A new feature enables remote check capture via cell phones, which may be particularly appealing for brokerage and insurance customers.

Those of you who know me, know that I have spent much of my career toiling to increase the number of native electronic B2B transactions. At NACHA this year there are signs of hope for B2B payments on a variety of fronts:

... The investment and financial planning company Raymond James presented a case study with Bottomline Technologies. Raymond James generates one million outgoing payments per year and utilizes Bottomline to manage its interface with SWIFT and route payment approvals across its 2200+ broker offices and 700 bank accounts. Key benefits include: improved customer service; increased audit/control; format standardization; and, most importantly as stressed by Raymond James, the solution is bank agnostic.

... Corporate adoption of ISO20022 within SEPA/Europe and beyond; top 10-15 corporate customers at each global bank are in the process of implementing.

... At last year’s Payments Conference NACHA presented the results of research on small to medium sized business’ payment capabilities and needs. This year, NACHA’s B2B initiative showcased a pilot of electronic invoice delivery, payment creation, and auto-cash application integrated into QuickBooks. The solution, from BankServ and ipCommerce demonstrates a seamless solution for SMB.

... 3Delta Systems enables merchants to send L2 & L3 data to buyers using PCards and is working to reduce friction for businesses accepting card transactions. Those that provide L2 and L3 data benefit from significantly reduced Interchange.

Western Union is an example of a payments company that has proactively adapted its product offering to changing consumer needs. News from Western Union at this year’s conference:
Western Union is offering expedited, same day payments - primarily in-person payments, but also via the Internet and IVR (telephone) systems.

... Did you know that if you are a Google AdSense publisher you can collect your advertising income in cash via Western Union worldwide?

... Western Union sends data to billers real time (or hourly, or daily depending on the capabilities of the biller’s A/R system). RPPS and other bill payment consolidators do, too. Is it too much to ask for B2B transactions to have similar timely data delivery?

Additional biller testimonials from Comcast and Liberty Mutual:

... Bill suppression is key, electronic payment accelerates receipt of funds by 7 days, but billers need to suppress paper bills in order to achieve their cost saving goals.

... Liberty Mutual: reduced internal lockbox resources from 29 FTE in 205 to 13 this year.

... Comcast: payroll cards, bank by card products are reducing walk in traffic, incorporate incoming transactions through eLockbox solution.

... Each new payment process requires extensive training to address customer concerns/questions about payment at each of Comcast’s 70 call centers.

... Comcast: Don’t forget, it’s all about the exception processing!

... Scalability is key, Comcast has 24 million customers.

Interest in Web 2.0 demonstrated by a handful of well attended sessions. One on financial institution marketing that I attended had audience members frantically taking notes; low point was when one banker asked "What’s LinkedIn?"

... BofA research reveals that customers very much prefer widgets, they are perceived as more conversational than websites

... BofA paying attention to iPhone, iGoogle, Adobe Flex, Silverlight

... Half of BofA’s 2 million mobile banking customers are using iPhones.

... Four key components of bank new media strategy: mobile/SMS, blogging, social media, Internet marketing (TDG Phenix)

... Quote: "If I think my bank is doing something great I tell 3 people, if they are doing something terrible I tell 25 people AND blog about it."- Larry De Palma, TDG Phenix

Web 2.0 has the potential to transform corporate treasury solutions. Where is the Mint for corporate payments? Ideally a light weight treasury workstation + payment hub. Best quote about today’s cash management offerings: "Treasury is the Atari of banking" - Milton Santiago, BofA

... Smart alerts have potential to help resolve B2B transaction issues more quickly, i.e. alert supplier that buyer attempted payment but had an issue, supplier A/R should contact buyer A/P (BofA session)

... FedEx analogy - demystifying treasury and payments - don’t care how it gets there (plane, truck, train) as long as it gets there (BofA session)

Fidavante-Merger Musings

Posted by Mark Brousseau

Vijay Balakrishnan, president of StratEx, LLC (770-598-5747) passes along the following blog entry with his musings on the recent merger between Fidelity National Information Services and Metavante. For more insights from Balakrishnan, visit his Web site at

In an era characterized by synthesized monikers a la "Brangelina" for famous couples, "Fidavante" is perhaps warranted for the entity to be created by Fidelity National Information Services' acquisition of Metavante. The combination promises to be a powerhouse to rival Metavante's cross-town rival Fiserv. With over 2200 core banking customers and 220 million cards processed, Fidavante's potential operating leverage is nothing short of phenomenal. The road to fruition, however, is dependent on the successful integration of two complex organizations.

At the core. The greatest payoff, arguably, is in the rationalization and rejuvenation of the combined core banking base. As the oft repeated watchword argues, "Core is King!" It is also the most difficult integration challenge ahead. Both companies have large customer bases with legacy systems. The Fidelity repertoire includes customers on systems as disparate as Systematics, Horizon, Mercury and Miser. The Metavante stable includes the Integrated Banking Suite (IBS) platform, as well as the Bankway products that came by way of the Kirchman acquisition- the latter marketed through both outsourced and in-house license models. In addition, Metavante has entered into an agreement with Temenos to produce a next-generation core banking solution for large U.S. banks. The Fidelity equivalent is its Profile product.

There are myriad strategy alternatives. Does it make sense to focus the new technology from either Temenos or Profile on effecting a technology turn within the existing small-to-medium sized institution base? Notwithstanding the daunting number of conversions, it can be argued that this option is easier than the heart surgery of core replacement in a large bank. Or is it better to leave the legacy base as is for now, and use the next-generation platform to go after larger institutions? How does one pick a winner between Temenos and Profile, given the shots across the bow already being fired with the recent statement from Temenos that its agreement with Metavante is binding on post acquisition successor parties? If large banks are the target market, exactly how big is big?

Whale hunting perils. I suggest the foremost prerequisite for success is to get a clearly articulated strategy for each core banking market segment. It can be argued that both companies have a predominantly small-to-medium financial institution footprint. Thus, execution of a strategy for that segment, regardless of what that ends up being, is likely to come naturally to the combined entity. Scaling the heights of large institutions, on the other hand, is a different matter. Selling to, and serving large, whale-like institutions is an art by itself, considering the long selling cycles, significant customization, and the volatility that large deals bring to the P&L lines. That said, there are elements within both companies that have come by way of acquisition that have a large-institution history. The trick will be to identify those skill sets, and allow them to succeed within an operating mileu that has long been used to the relative predictability of smaller institutions.

Switch hitting. The payments side of the business offers major synergies. The NYCE network from Metavante and the debit switching operation from Fidelity's eFunds acquisition are natural fits. The synergies between these two entities stretch back in history to when eFunds was part of Deluxe Corporation. If memory serves me right, Deluxe Data Systems provided debit switching processing services for NYCE based on the flagship CONNEX product. NYCE later took the processing in-house, based on a licensed version of CONNEX. Even today, CONNEX is a leader when it comes to very high volume switches like NYCE, and the synergy analysis should be straightforward. Looking ahead, the gap that has endured the Deluxe-eFunds-Fidelity chapters, is for a product that could compete effectively with ACI's Base 24 at smaller networks for switching and peripheral functions like ATM driving... another acquisition down the road?

It's in the cards. Fidelity brings with it a strong card processing base aimed at predominantly issuance processing for credit unions. This business has preserved its dominance in the credit union space right from its inception as Telecredit, through its acquisition by Equifax, spin-off as Certegy, and subsequent purchase by Fidelity. This is a net plus, as there is nothing on the Metavante side that enjoys a leadership position in this segment.

Striking the right image. Both companies moved into image based check, remittance and document processing through acquisitions. Metavante has a comprehensive offering from its purchases of AFS, Vectorsgi, Endpoint Exchange,Vicor and Treev. Its strategy has been to grow the medium sized institution AFS business base, while taking its image work-flow expertise up market to large institutions, leveraging account relationships and IBM CPCS based product knowledge from Vectorsgi. The Fidelity offering is primarily based on its acquisition of Bankware. There will likely be a need to rationalize offerings between the erstwhile Bankware and AFS product lines.

There has always been a gap in the old AFS line at the very low end (institutions of less than $100 million in assets). There may be a case for looking at the Fidelity (Bankware) line as an alternative. I suspect, however, that both companies will look at addressing the low end through outsourced item processing services. The choice of the right platform will depend on multi-institution capability. Both Bankware and AFS originally built products for in-house licensed use. It is often the case with products initially built for in-house licensed use that functions like partitioned databases and multi-customer billing (as opposed to operating a different instance of the product to serve each customer), are part of later redesign efforts. Both companies have been at the multi-institution outsourcing business for a while, and it is entirely possible that both platforms lend themselves adequately to the needs today. Metavante's Vicor acquisition brings a high end wholesale remittance product line which doesn't have an equivalent on the Fidelity side. The Endpoint Exchange check image exchange network is unique with the many thousand routing and transit points served, although it is still challenged in its ability to offer a convincing alternative to the Federal Reserve.

Check it out. Fidelity has a check verification and guarantee business that includes the well known SCAN check verification system, courtesy eFunds. There could be interesting synergies between these check services, and Metavante's merchant capture products and services. Being able to assess payment risk at the point of check image capture can be a powerful combination, particularly if there are thoughts of launching "bank agnostic" merchant capture services. A broader approach to assessing debit risk- a debit bureau if you will- can also include Chex Systems from the erstwhile eFunds stable which is easily the most well established new account risk management system in the country.

Across the oceans. While the two companies together will operate in 27 countries and serve customers in 90, the international presence comes mostly from Fidelity. The expansion overseas has its roots in a strategy on the part of what was then Equifax Card Services to take its card processing expertise beyond U.S. shores. This has grown into a viable global presence. Fidelity's eFunds acquisition also brought with it a large presence in India, which provides a base of lower cost, high quality technology development expertise. This operation has its roots in the joint venture established between Deluxe Corporation and India's HCL Corporation in the mid-1990s to tap into India's growing technology base (eFunds was later spun off from Deluxe). Metavante's international presence is more modest, comprising mostly of distributor based product sales and recent agreements with Temenos and Monitise. The future augurs well for Fidavante's international expansion, as it is not beset with the same scale of integration challenge as the home base.

Cultural Exchange. In most mergers, getting different cultures to work together is more difficult than rationalizing products and technologies. At first glance, Fidelity and Metavante are similar in that they are both providers of banking and payment processing services to mostly mid-sized institutions. Processors tend to have a culture that is unique in that there is great emphasis on operational efficiency to keep pushing those "clicks" through. A closer examination yields a few differences. Metavante had its origins as the captive data processing center of the Marshall and Ilsley bank. Until the spin-off of a year or so ago, the company grew dramatically under the ownership of the large mid-western bank. The company prides itself on customer service, and was able to develop its culture in a relatively stable atmosphere. The Florida based Fidelity has grown through the acquisition and absorption of sizeable businesses with varied histories. As discussed previously, Fidelity is also more global in its footprint. While I don't see any "show-stoppers", it should be recognized that there will be varied perspectives at the table.

A third pole? Almost more interesting than the Fidavante saga is the potential shift in the competitive landscape. The combined entity presents a formidable challenge to Fiserv. With the exception of not being able to match Fiserv's dominance in the ACH arena with its PEP+ product, it is arguably set to becoming the second pole in this business. Does this signal a rush for scale on the part of others? Like nascent planetary systems, there is the need for a center of mass around which alternate poles develop. Will it be First Data, privatized now, and debit payment-centric in posture? Can an SAP or an Oracle morph from being horizontal players to slugging it out in this vertical market? Where does Intuit go, post the Digital Insight acquisition- was that just a toe in the water or a harbinger of a more purposeful move into banking and payments? Where does this leave the many niche players in the marketplace?

It is possible that nimbleness and innovation will serve niche players while the big players sort out the integration challenges. They will do well, however, to heed the adage that the grass gets trampled when elephants quarrel. To take on the dominant players on their terms- especially those who can leverage their core banking business base- is suicide. The niche players only have two choices: Become a bigger fish, or find a smaller pond.

Predicting course and speed in choppy waters is difficult at best. Nevertheless, the observations offered here, as well as insights from those with other perspectives, makes this a fascinating development to watch.

What do you think? Post you comment below.

Sunday, April 12, 2009

Economy Fuels Prepaid Card Demand

Posted by Mark Brousseau

Global economic downturns appear to be weighing heavily on the growth of credit and debit card markets worldwide, while simultaneously fueling an increasing demand for prepaid cards.

Prepaid industry participants however, will discover unique challenges in growing their business in the international markets, according to Mercator Advisory Group.

"Going after prepaid opportunities in the international market requires more than just understanding of the macro-economies and regulatory environments in each markets," comments Terry Xie, Director of Mercator Advisory Group's International Payments Advisory Service. "Fully understanding targeted customers, knowing where they are, and what financial help they need, among others critical factors, are pre-requisites for designing and implementing creative product plans to best serve these customers. In addition, selecting the right sales, marketing, and distribution channels while aligning the interests of different parties involved in a prepaid business ecosystem are often key success factors in serving prepaid customers around the world."

Key findings on the prepaid card market from Mercator Advisory Group:

... Legal, regulatory, and cultural differences in international markets are significant and represent challenges for international players.

... Out-of-the-box thinking is crucial as prepaid business is a non-traditional market for the banks. This gives specialized program managers the edge in competition.

... Innovations in providing prepaid solutions to identify and serve un-meet financial needs in developing markets bring lots of potentials.

... The value chains of the prepaid card industry in different markets tend to be complicated and demand careful considerations in the designing of a prepaid business model. Getting different parties involved and building a business ecosystem requires creative thinking and a willingness to cooperate.

... The design of prepaid card products need to be based in-depth understanding of the market opportunities and consumer behavior. A successful prepaid program will have features and functions that resonate with a large group of targeted users with very specific needs.

What do you think? Post your comments below.

Thursday, April 9, 2009

Falling Tech Demand

Posted by Mark Brousseau

Business outlays for IT equipment and software have slid as a share of the U.S. economy, according to statistics from the Bureau of Economic Analysis. U.S. companies' tech spending as a share of the gross domestic product (GDP) is now below that of the 2001-02 tech bust, the bureau says. The good news: the 75 technology companies in the S&P 500 held $138 billion in cash at the end of 2008, a drop of less than 2 percent from the fourth quarter of 2007, according to Capital IQ, BusinessWeek.

Tuesday, April 7, 2009

ACH Growth Slows

Posted by Mark Brousseau

An interesting article from the American Banker about ACH growth:

ACH Growth Tapering Off

By Steve Bills
American Banker

Growth of automated clearing house transaction volume fell to single digits last year as the recession slowed payments activities and electronic check formats matured.

The big banks that posted significant gains in origination did so largely because of consolidation, and bankers said their top ACH goals for this year include preparing for the IAT international transaction format that takes effect in September,improving transaction quality and reducing fraud.

Janet O. Estep, the president and chief executive officer of Nacha, the electronic payments association, said the slumping economy is hindering the use of ACH.

"I was in a meeting the other day where an individual said, 'Flat is the new up,'" Estep said in an interview last week to discuss Nacha's annual report on ACH activity, which is to be released today as the Herndon, Va., trade group convenes its annual payments conference, in Orlando.

Overall ACH volume rose 6.9%, to 18.3 billion transactions, Nacha said, versus 13.2% growth in 2007. The group changed its methodology this year, adding in off-network volume such as on-us transactions and directsends between banks.

The value of ACH payments rose 4%, to $29.96 trillion.

JPMorgan Chase & Co. retained its position as the top originator, but other big players moved.

Wells Fargo & Co., which was the No. 3 originator in 2007, acquired last year the No. 4 company Wachovia Corp., giving Wells a 134.3% surge in originations and putting it in second place, ahead of last year's No. 2, Bank of America Corp.

Keith Theisen, a senior vice president in Wells' treasury management unit, said that, even apart from the purchase, Wells had a big year, with growth above 30%.

"It's been one of the best years for ACH I've seen in my 35 years at Wells Fargo," Theisen said.

Even accounts receivable conversion, largely flat industrywide, grew 20%, which he attributed in part to the company's smart decisioning service, which can determine whether check images are eligible for the ARC format or should be cleared as checks images.

At JPMorgan Chase, the nation's largest originator, ACH volume rose just 2.7%. Pat Thelen, the executive director of ACH and global check deposit products for JPMorgan Treasury Services, said the slow growth was less a result of the economy than the fact that "the business has matured."

JPMorgan Chase has stepped up its fraud and data security efforts in the past year, with real-time fraud monitoring, he said.

Bank of America Corp. fell one notch in originations, though its ACH volume grew 9.8%.

Robert W. Johnston, Bank of America's product executive for check and ACH, said the Charlotte company is focusing on IAT.

"The impact to the banks is enormous," Johnston said. "This is probably the largest change ever being introduced by Nacha."

Though IAT is designed chiefly to enable U.S. banks to receive ACH payments from abroad- by checking the payments' initiators and beneficiaries as required by the U.S. Office of Foreign Asset Control- the impact could be much broader, Johnston said.

"The IAT rules, what OFAC wants you to scan for, could introduce huge volumes," he said. The format could also apply to domestic transactions, if the cash for the transaction is wired in from a non-American bank, he said.

Several banks posted declines.

At the No. 48 originator, First Citizens BancShares Inc., ACH volume fell 12.8%. Denton Lee, a group vice president at First Citizens and its manager of business and treasury services, said the decline in volume, including payment by checks and cards, has been "pretty dramatic, especially since November. We wondered if we were unique. We are not."

However, Dennis Feterl, a vice president in treasury services at First Premier Bank, a subsidiary of United National Corp., said the economy was not the reason for the 16.5% decline at his bank, the No. 33 originator. "It was natural attrition and the loss of a couple of our large clients," he said. "They were acquired, and their ACH business went" to the acquirers' banks.

Volume fell 15% for No. 5 originator, SunTrust Banks Inc., which operates primarily in the Southeast and has been hit particularly hard by the economic slump. Volume at the prominent credit card issuer Capital One Financial Corp., the No. 10 originator, fell 11.7%.

Credit card and mortgage processors were among the biggest users of Nacha's ARC format, used to convert check payments to ACH at the retail lockbox. Since the ARC format went into effect March 2002, it has had robust growth and become the second-largest ACH category after direct deposit of payroll.

Several bankers said the ARC format has now matured and is unlikely to return to skyrocketing growth. In fact, quarterly reports from Nacha showed ARC, which registered 23.4% growth in 2007, was offmarkedly in 2008, corresponding to the slowdown in the economy. After growing 5.03% in the first quarter compared with a year earlier, ARC volume grewjust 2.67% in the second quarter. Volume fell, 0.3% in the third quarter and 5.24% in the fourth quarter.

Steve Stone, a senior vice president in treasury management operations at the PNC Bank unit of PNC Financial Services Group Inc. of Pittsburgh, said that the complexities of check conversion probably would outweigh the financial gain for billers that have not adopted ARC already to gain the advantages of least cost routing or faster availability.

"For most companies making check deposits, least-cost routing is probably not worth the additional cost involved," Stone said. "Unless you're a high-volume depositor, the savings don't amount to a whole lot of money."

Nacha pointed to some bright spots, including online payments, business-to-business and back-office conversion. Estep said the public is becoming more comfortable with online commerce, such as authorizing automated debits for recurring payments and using online bill-pay services to push payments electronically to billers.

"People across the board realize they don't have to use paper any longer."

Thursday, April 2, 2009

A Message from Frank Martire

Posted by Mark Brousseau

The following is a copy of an e-mail that was sent to all Metavante employees on April 1, 2009:

An Important Announcement: A Message from Frank Martire

Today we are pleased to announce that the Boards of Directors of Fidelity National Information Services, Inc. (FIS) and Metavante Technologies, Inc. (Metavante) have approved a plan to combine our companies. This combination positions us to offer one of the industry’s most comprehensive ranges of core processing, payment and risk management services to financial institutions and other businesses worldwide.

Both companies are preeminent leaders in our industry. FIS is ranked the number one banking technology provider in the world by American Banker and the research firm Financial Insights in the annual FinTech 100 rankings.

Headquartered in Jacksonville, Florida, FIS maintains a strong global presence, serving more than 14,000 financial institutions in more than 90 countries. Metavante is based in Milwaukee, Wisconsin and brings a 45-year tradition of innovative solutions and client partnership, serving 8,000 financial services firms and businesses worldwide.

The name selected for the newly combined company is Fidelity National Information Services, Inc., with the corporate headquarters to be located in Jacksonville, Florida. Following the completion of the transaction, the company will be publicly traded on the New York Stock Exchange under the “FIS” ticker symbol.

Leadership Team
The following individuals have been named to the new FIS leadership team:

  • William Foley, Chairman of the Board (Current FIS Chairman of the Board)
  • Lee Kennedy, Executive Vice Chairman of the Board (Current FIS President and CEO)
  • Frank Martire, President and Chief Executive Officer (Current Metavante Chairman and CEO)
  • Gary Norcross, Chief Operating Officer (Current FIS COO)
  • Michael Hayford, Chief Financial Officer (Current Metavante President and COO)
Announcements about other members of the senior management team will be forthcoming as the new organization begins to take shape.

Strategic Rationale and Benefits
You are probably wondering about the rationale behind the decision to combine FIS and Metavante.

Here are some of the key benefits:

Scale and Reach – The scale of the combined company creates efficiencies, which improve our long-term competitive position. We also gain the ability to leverage FIS’s global reach to sell Metavante products outside North America.

Product Breadth and Depth – Our combined product and service portfolio will enhance our growth prospects. The increase in core banking relationships expands our cross-selling opportunities, giving us complete coverage of the top 100 financial institutions. In addition, we become an industry leader in item processing, prepaid card solutions and credit card processing for community banks.

Financial Strength – The combined company has more than $5 billion in pro forma 2008 revenue and a high percentage of recurring revenue. Increased cash flow will allow us to fund growth opportunities and to further pay down our debt ― both very important in this challenging economy.

As both the banking and financial technology industries continue to consolidate, combining our two companies is the best way to position the new FIS for future growth and long-term success.

Your Role
Focus on our clients. Each and every decision we make is with our clients’ best interests in mind. It is very important that we continue to deliver excellent service throughout the integration period and beyond. Assure our customers that the superior service and support provided by each of our companies will continue and then follow through by delivering on our commitments.

Equip yourself with information to clearly communicate about the combined company and to explain the benefits. Share any client or employee concerns with your manager so an appropriate response can be identified. You may also e-mail with any questions you may have.

Direct any media inquiries to Marcia Danzeisen, SVP, Marketing and Corporate Communications for FIS at 904-854-5083 or Chip Swearngan, VP, Corporate Communications for Metavante at 414-357-3688.

Next Steps
The transaction is subject to approval by FIS and Metavante shareholders, receipt of regulatory approvals, and the satisfaction of customary closing conditions. While this planning process takes place, business line executives and sales representatives will meet with key clients to communicate the benefits of this combination and respond to any questions or concerns.

Concurrently, integration teams representing both companies will form to begin the planning process of creating an even stronger resulting organization. Until the transaction closes, please limit direct contact between employees of the two companies unless you are specifically requested to do so.

Thank You
In closing, we want to take this opportunity to thank you for your continued dedication and support. We have the best employees in the industry and we are excited about the new opportunities this important step in the evolution of our companies presents.

Lee Kennedy, President and CEO, Fidelity National Information Services, Inc.
Frank Martire, Metavante Technologies, Inc., Chairman and CEO

Wednesday, April 1, 2009

Healthcare M&A Still Thriving

Posted by Mark Brousseau

Despite a weakening economy, 2008 was a solid year for M&A in the pharma and healthcare information and technology industry, according to Berkery, Noyes & Co. The total volume of M&A transactions in the pharma and healthcare information and technology market for 2008 increased to 156 transactions, an increase of 16 percent over the previous year; however, the total value decreased to just below $9 billion, a decrease of 9 percent, the investment banking firm says.

The most active segment for 2008 by volume was Healthcare IT, with a total of 75 transactions, or 48 percent of the total volume. Healthcare IT has been the most active segment for the past several years and we do not expect this to change in the upcoming year.

Berkery, Noyes & Co. observed a decrease in financial acquisitions during the second half of 2008, even though overall activity in the market as a whole remained solid throughout the year.

The industry ended the year on a strong note - Q4 2008 was more active in terms of deal volume than it had been for the previous 5 years, the firm says.

A notable trend for 2008 is that while the aggregate value of the industry’s top 10 deals and the ratio of transaction value/volume decreased from previous years, Berkery, Noyes & Co. observed an increase in 2008 median enterprise value. This suggests an overall increase in buyer selectivity as well as increasing activity and interest in the middle market, the firm says.

Looking ahead, Berkery, Noyes & Co. expects to see continued deal activity in the pharma and healthcare information and technology markets. These markets are less impacted by the economic downturn and may benefit from increased interest in healthcare.

Electronic Content Still out of Control

Posted by Mark Brousseau

In its annual “State of the ECM Industry” research report, released at its conference and exposition here in Philadelphia, AIIM has found that managing electronic office documents is still a challenge for 47 percent of organizations, and that modern business communication channels—instant messages, text messages, blogs and wikis—are uncontrolled and off the corporate radar for 75 percent of businesses. Additionally, e-mail is still out of control, with 55 percent of organizations having little or no confidence that important emails are recorded, complete and retrievable. However, AIIM’s research also found that whereas two years ago compliance was the main driver for bringing this content into a controlled and searchable environment, cost savings and efficiency are now the main motivating factors.

According to the AIIM survey, for those that have invested in ECM or document and records management solutions, hard dollar savings have on the whole turned out on plan, and soft dollar benefits have exceeded expectations. Compared to other significant technology investments, ECM implementations have generally produced better returns.

John Mancini, President of AIIM, comments, “For many organizations, poorly managed and out of control information represents a huge potential source of bottom line savings in this tight economy — if only organizations would just take this cost saving seriously. Controlled content can be fed into business processes to speed them up, cut down travel via project collaboration, and form a knowledge base for the business. Uncontrolled content represents a lost opportunity – and a major compliance risk.”

The survey also found that spending on Business Process Management (BPM) and Workflow was likely to grow strongly in 2009, with Enterprise Search, Email Management, Document Management and Records Management all set to show positive growth.

What do you think? Post your comments below.

Recovery in Sight for IT Spending?

Posted by Mark Brousseau

The U.S. recession keeps getting worse than Forrester and many economists had expected.

Instead of the 2 percent to 3 percent drop in real gross domestic product (GDP) that the United States experienced in the 1990s and 2001 to 2002 recessions, U.S. real GDP fell by more than 6 percent in the fourth quarter of 2008, and will fall by a similar amount in the first quarter of 2009, with more (although lesser) declines until the end of 2009, Forrester predicts.

The steep drop in economic growth in the fourth quarter both caused and reflected a similar fall in technology purchases, Forrester said. As a result, the research firm now expects U.S. business and government purchases of IT goods and services to decrease by 3.1 percent in 2009, compared with the 1.6 percent increase it had previously projected for the year.

Computer equipment purchases will continue to bear the brunt of cutbacks in technology investment, Forrester says, but purchases of network equipment, software licenses, and IT consulting services will also drop.

As the US economy starts to recover in late 2009, Forrester believes IT purchases will revive strongly, with strong growth projected for 2010.

What do you think? Post your comments below.