Get Ready For More RP Vendor Consolidation

By Mark Brousseau

You might have been surprised to hear this morning that long-time remittance and lockbox solutions vendor JB Software, Inc. is being acquired by India-based 3 i Infotech Ltd.

3 i Infotech signed a deal to acquire the TAWPI Hall of Fame member and its units for $25.25 million in cash, according to a Dow Jones report. The move will give the Indian company a greater footprint in the payments processing business in the U.S.

“This company has a payments processing product which is well accepted in the U.S. market. We expect strong growth for this product in markets outside the U.S. as well,” 3 i Chief Financial Officer Amar Chintopanth told the Dow Jones Newswires.

While Chintopanth might be expecting growth for JB Software, several industry watchers I spoke with today are anticipating more consolidation among remittance solutions vendors. “I expect to see continued consolidation among the remittance solutions providers, fueled by the growth opportunities offered by remote deposit,” Creditron President Wally Vogel (wally_vogel@creditron.com) told me, noting that JB Software was only an occasion competitor to Creditron, which was acquired this summer.

“Remote deposit, integrated with the accounting functions of remittance processing, provides a powerful tool with business implications for accounting application providers, banks, large corporations and remittance technology companies,” Vogel said. “There is an intersection of opportunities for these diverse players that makes this an exciting time for our market.”

Steve McNair (mcnairs1@aol.com), president of FTP Consulting Services, Inc., in Southlake, TX, also expects more consolidation among remittance solutions providers. Going forward, he believes we could see more end-user interest in payments outsourcing than in remittance software license sales.

“This deal is significant because it’s further evidence of the consolidation of the remittance market,” McNair told me. “What’s also interesting is that the deal is with an international company with little background in remittance processing. Given that, I’m wondering whether JB Software will be changing focus towards global engagements, and specialized processing efforts, such as government and custom applications.”

To that end, McNair said 3 i Infotech, by virtue of being based in India, could likely provide JB with the people necessary to deliver on custom programming efforts.

Clint Shank (cshank@sortlogic.com), president of Omni-Soft, Inc., the parent company of SortLogic SYSTEMS, sees this deal as part of a worrisome larger trend. “In my view, our market is eating itself from the inside out. The big sales based on big hardware and expensive software are gone, and in their place is a commodities market,” he said. "The folks that did well in the past are falling flat in this market. For instance, how long was IBM the most dominant player in our market? Forty years? Fifty years? What does it mean now that they aren’t even present? Look at BancTec and you see pretty much the same thing.”

“What we are experiencing is a real sea change,” Shank continued. “The big players are too slow to respond to an overnight shift in the market and the new guys are filling the void. It used to be that the big ate the small. Now it’s the quick that eat the slow.”

The question everyone I spoke with was asking was: “Who is the next to be eaten?”

What do you think? E-mail me at m_brousseau@msn.com.

Check 21 Speed Bumps

By Mark Brousseau

With the banking industry seemingly speeding towards electronic check clearing, it’s easy to forget that there are some speed bumps along the way. I asked Clint Shank (cshank@sortlogic.com), president of Omni-Soft, Inc., the parent company of SortLogic SYSTEMS, what he saw as the biggest obstacles that financial institutions are facing as they migrate to electronic clearing. His response: the fact that paper checks are still being issued, and that most legacy capture systems won’t get replaced anytime soon.

Shank noted that most businesses – and some individuals – would continue to issue paper checks for the foreseeable future, a fact that is backed up by myriad studies. And while printing substitute checks or image replacement documents (IRDs) to process in-clearings is not cost prohibitive, it’s also not cheap. Similarly, Shank believes that most legacy check capture systems still have substantial value on the books, and many financial institutions have a big investment in staff focused on using and maintaining these systems.

“The replacement cost for a system that handles both paper and electronic payments is steep, in terms of dollars, resources and time,” Shank noted. “The cost to upgrade a legacy system to process electronic payments may be more affordable, but nonetheless, is still pretty pricey. Moreover, with the consolidation in the solutions provider market, it is now possible for the unwary to put money in their competitor’s pocket by investing in an upgrade to an existing legacy system,” Shank added.

So Shank believes the real hurtle that financial institutions must overcome is how to protect their investment in their legacy capture system, while still moving toward check truncation. “This is a game played on a knife’s edge, where any miss-step can provide costly,” he said. “Perhaps this is why new services like remote deposit capture and Back Office Capture – which can be added without compromising this delicate balancing act – are so highly favored.”

How are your financial institution’s legacy systems impacting its electronic clearing initiatives? E-mail me at m_brousseau@msn.com.

Is it the Last Dance for Remote Deposit Capture Vendors?

By Mark Brousseau

Could the party already be winding down for remote deposit capture vendors? Possibly, warns Clint Shank, president of Omni-Soft, the parent company of SortLogic SYSTEMS. He thinks RDC technology vendors should be terrified that companies such as PeachTree, Intuit, FRx Software and Microsoft will integrate remote deposit capture capabilities into their accounting packages, and snatch their potential market share for the red-hot technology.

As evidence, Shank points to last week’s announcement that BankServ is offering its DepositNow system for online bank deposits through Windows Vista Business & PASS Commerce Center. Businesses that subscribe to the DepositNow service can scan checks using a desktop PC, then deposit them online without making a trip to the bank. A second version of the product, DepositNow A/R, also reads the handwritten dollar amount on a check, then automatically matches it to the correct customer and invoice in the popular QuickBooks or PeachTree accounting programs. A version of DepositNow A/R integrated with Microsoft’s Small Business Accounting system also will be introduced soon.

This integration of remote deposit capture with receivables technologies makes perfect sense to Shank. Billers are shifting their focus from automating individual A/R tasks to better managing the flow of receivables information. The idea is to streamline A/R procedures to improve working capital management, achieve labor savings, increase posting accuracy, eliminate so-called information float, and enhance service to internal and external customers.

Shank reasons that it’s only a matter of time before the accounting vendors take on the remote deposit capture functions themselves. There’s no reason for them to leave that money on the table, and give up a chance to add value to the products. Then it will be hard for the RDC technology vendors to make headway in these segments, or snag healthy margins.

How much time do the RDC technology vendors have left before the party is over? Shank’s not sure. But he believes they better strike fast, because the band is already packing up.

Mark Brousseau is the facilitator of TAWPI’s Payments Capture & Clearing Council and Forms Processing Leadership Council. He also is president of Brousseau & Associates, a strategic marketing and PR firm specializing in the payments and document automation arenas. Brousseau can be reached at 717-767-2574 or via m_brousseau@msn.com.


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