Paytrust Bought by Metavante

Factor Systems — Flint Lane’s New Company

Princeton eCom Lands Lazard Funds

Trintech’s Payment Software

Corrections or additions?

This article by Barbara Fox was prepared for the July 10, 2002

edition of U.S. 1 Newspaper. All rights reserved.

Life in the Fast Lane: Online Banking

Three years ago, three companies, including Princeton’s

Paytrust, ventured into a new kind of online banking — electronic

bill presentment and payment. You can get your bills sent to Paytrust

and they would be presented to you, online, for you to pay. Paytrust

bought one of its competitors, and Metavante, a Milwaukee subsidiary

of a regional bank’s holding company, bought the other. Now Metavante

will own all three. The announcement that it would buy Paytrust came

July 3.

And that’s probably good for Paytrust, which apparently had only one

percent of the entire online bill paying market, and this market is

not growing as quickly as analysts thought it would. Slow market


makes investors unhappy and client bankers nervous. "Banks are

under increased pressure to make sure their vendors are on a solid

footing," says Jim Bruene of "The


by Metavante can give Paytrust credibility as well as financial


"Being part of the third largest bank processor in the U.S. gives

us a lot of stability and capability going forward," says Ed


co-founder and executive vice president of Paytrust.

Though Paytrust will no longer be a headquarters company, there is

still activity here in the electronic payment industry. First came

Princeton eCom, founded as Princeton Telecom in 1984 to be an


processing back office for banks, now with about 200 employees on

College Road. Although it missed its IPO window, it just announced

impressive new funding. The most recent entry is Factor Systems,


by one of Paytrust’s founders, Flint Lane (see below for both


Top Of Page
Paytrust Bought by Metavante

When the dotcom slowdown put a kink in the growth of

online banking, Metavante went into buying mode. "The last year

and a half has been a very good year to be a 38-year-old subsidiary

of a regional bank when it came to acquisitions," says Tim


vice president at Metavante.

Metavante is the 38-year-old technology company of Marshall & Ilsley,

a bank holding company for M&I Bank, a regional bank in Wisconsin

with $630 million in revenues. Most banks do their own back-end work,

and only one other bank — Mellon — has a similar separate

business to process transactions for other banks. "We now do


for more than 700 financial institutions," says Patneaude.


with competitive banks in Wisconsin, we played off our strengths on

being bank friendly."

Formerly known as M&I Data Services, Metavante was renamed about five

years ago to account for such new services as E-banking and wealth

management. Metavante’s founder, Dennis Kuester, is CEO of M&I Bank.

Last year Metavante bought two companies for back end processing:

Brokat US (a Germany-based software firm), and Atlanta-based Derivion

(which does much of Paytrust’s processing). It also bought one of

three firms doing front-end interface, CyberBills. Meanwhile PayTrust

bought the second entry, Now Metavante owns the


"Metavante and Paytrust are the only two facilities that do paper

bill truncation (scanning bills and presenting them online to


says Paytrust’s McLaughlin. "We have each developed technologies

that are complementary, and ours brings a lot of value to the


We expect to achieve synergies by combining the work we have done.

We don’t foresee any increases in pricing." Insiders say what

will make this acquisition work is that Metavante, Derivion, and


have always been open with sharing information and distributing bills.

Another factor that will make it work is the chance to market services

to online bill paying’s initial users. Most of the users go to their

credit card site to pay just the credit card bill. "Now we can

work with those people who are paying that bill and offer them the

opportunity to pay other bills."

"Paytrust is powering sites for CapitalOne, CitiBank, and American

Express, and Metavante is working with Chase and partnering with Wells

Fargo," says McLaughlin. "Through this combination over a

third of the credit card population is represented by providers that

we already have an agreement with, which makes us incredibly well


"The combined organization will have 5 million monthly payments

and establish Metavante as the clear number two to the largest


in the market, CheckFree," says McLaughlin. "Going forward,

the value of the partnerships we have established will come to the

fore," says McLaughlin.

The deal was signed late on Monday, July 1. Employees were told, and

press releases issued, the following day. The buyout should close

in the next several weeks.

The company is not ready to say what will happen to Paytrust’s


but it seems likely that clients will continue to do business with

Paytrust as a brand name. Metavante typically operates behind the

scenes and its name is not familiar to the consumer.

Nor will anyone predict which of Paytrust’s 50 employees in


will keep their jobs. Paytrust has 50 to 60 employees on Brunswick

Pike and another 250 nationwide, most at a call center in South


but Metavante has a 100,000-foot state-of-the-art call center in


and another in Nevada. "We are going to take this time to decide

how are we going to look and what are we going to do to provide the

best services," says Patneaude.

In 1998 Paytrust was the third start-up for co-founders McLaughlin

(Wharton, Class of 1987) and Flint Lane (Rensselaer, Class of 1988).

They met at Logic Works, formerly on Campus Drive, now part of


Associates. Their mothers-in-law and other relatives provided seed

funds, and the firm announced, then withdrew an IPO in March, 2000.

After Wharton McLaughlin designed large-scale document transmission

for such clients as Motorola, Florsheim Shoes, IBM, and Martin


Lane had developed a method for scanning bills — automated ways

of identifying forms and of lifting information off of the "scan

line," the string of numbers along the bottom of each bill. This

enabled Paytrust to include an image of the original bill with the

paper check.

Both Metavante and Paytrust offer a seamless turnkey solution that

allows clients to maintain the integrity of their websites. If you

are a client of Chase, for instance, you would not know you are using

a Metavante website. Their huge competitor is CheckFree, which often

provides only links from client sites to its own site. But CheckFree

reportedly processes 25 million transactions per month, compared to

the 5 million attributed to Metavante/Paytrust. And these numbers

are paltry when compared to the number of paper checks that get


The utopia of paperless bill presenting and payment is still a long

way off.

"From anecdotal feedback, people that use online services like

them, but most don’t want to turn over their mail to another


says analyst Bruene. "And Paytrust has a narrow niche within the

bill payment field. If 20 million households are paying bills online,

I would speculate that Paytrust has less than one percent of the


He says that most of the online payers — 10 to 15 million


— are paying single bills online to a credit card. They use the

online system so they can pay at the last minute, yet know the bill

has been paid.

Metavante’s Patneaude agrees that the industry is a year or two behind

original projections but quotes a report by Elizabeth Robertson of

the TowerGroup, who says that online bill payment has grown from one

percent of households in 1998 to seven percent in 2001. She claims

that by 2005 at least 19 percent of U.S. households will pay at least

one bill online. Says Patneaude: "As a company we are experiencing

double digit growth."

"Paytrust investors were looking for financial stability,"

says Lane, the Paytrust co-founder who now has a new company, Factor

Systems. "And Metavante saw the market in the value that Paytrust

had established. It had bought the smallest of the three companies

in the market and liked the market so much they wanted to own it.

Competing against CheckFree, they saw Paytrust as significant."

Paytrust Inc., 2572 Brunswick Pike, Lawrenceville

08648. Glenn Hazard, chairman and CEO. 609-720-1818; fax,


Home page:

Top Of Page
Factor Systems — Flint Lane’s New Company

Flint Lane’s new business is the reverse of his former

business, Paytrust. Paytrust helped consumers pay their bills online,

but Factor Systems, which has 10 people on Everett Drive, helps small

and medium-sized businesses present their bills online.

"At Paytrust we always struggled with how to get small businesses

to send their bills out electronically," says Lane. "At Factor

Systems we get billing statements out more efficiently by taking a

complete electronic feed from a small business. We take care of


the bills, whether by putting them online or by printing, folding,

stuffing, and mailing them."

"Big billers have always outsourced their billing," says Lane.

"They know they can’t be as efficient as someone who


Specialists get economies of scale in equipment, paper and envelopes,

and postal discounts. "But no one has ever offered this to small


The challenge of processing all the different varieties of electronic

feeds used by smaller companies — those sending fewer than 50,000

bills a month — have driven a couple of other companies away from

this market, says Lane. "There are pure mailing shops, and pure

E-mailing shops, but the business model for this company hasn’t


In contrast to most mailing shops, he focuses almost exclusively on

billing. "It is a whole different animal. Each piece is distinct.

Each one is printed in a special way and needs a reply envelope. We

work with each business to come up with a billing format they are

happy with."

What will make Factor Systems succeed, he believes, is that it works

both with cyber bills and snail mail bills. "We will help you

with all your bills today, but down the road we can convert all your

bills to an E-stream. It will be a long road."

"One of the problems trying to convert someone to electronic


is the start-up costs," says Lane. "Let’s say I can convert

10 percent of my recipients to electronic mailing, and each snail

mail invoice costs $1. If I have a million customers, I can save


a month, but if I have a small business, savings might be $100 a


Some of his customers turn over as few as 15 bills a month.

Lane’s father died when he was young, and he had his first job when

he was 11 years old. "I liked the concept of making money. In

college I started a painting company — it is amazing how much

money you can make painting. My mother always told me you can change

the world as long as you believe in yourself."

"I still want to change the world and am excited about the


of this company," says Lane. At 35, he is the father of two girls,

ages six and four, and a baby boy. "I had been involved with four

or five different startups and am glad that Paytrust found some good

success with the Metavante acquisition, but right now am really


on my own company."

An alumnus of Rensselaer, Class of 1988, he joined Brownstone


a mainframe repository software company, when it had just seven


When he left there were 50. It was bought by Platinum Technologies

in 1995. Then he was an early employee at Logic Works, which was also

bought by Platinum Technologies and in turn was swallowed up by


Associates. In 1998 he and McLaughlin founded Paytrust; he was


and McLaughlin was CEO. He left Paytrust in June, 2001, and


started FactorSystems. The terms of his contract cannot be disclosed,

but Lane says it was "an amicable agreement. My leaving was a

time of change for me."

He started the pilot service in January, went live in April, and is

not discouraged by his progress so far — he has a couple of


clients. "Consumers and small businesses don’t change habits


It is much like the ATM market. Everybody believes it happened


but it actually took 20 years for people to use ATM cards. It is still

a huge opportunity, but it is the kind of thing that takes time. My

goal is to build a successful profitable venture, and I expect this

business to be around for 35 years."

"Working with all these startups gave me the confidence to go

off again," says Lane. "Paytrust was a great experience, and

I would do it again in a heartbeat."

A nine to five job would certainly be easier, he says, "but life

is not about easier. A lot of people take the easy route but that

is not for me."

Factor Systems, 51 Everett Drive, Building B, Suite

50, Princeton Junction 08550. Flint Lane, president. 609-580-0050;

fax, 609-580-0041. Home page:

Top Of Page
Princeton eCom Lands Lazard Funds

Your company might have the greatest payment technology

in the world, but if the bankers worry about your stability, they

won’t go near you with the proverbial 10-foot pole. That’s the problem

that companies in the young electronic bill presentment and payment

industry are having.

So when Princeton eCom announced last month it had received $10


from Lazard Technology Partners (LTP), it was a very good sign. Three

previous investors had chipped in $21 million more for a total of

$31 million for the College Road East-based company. It was Lazard’s

prestige, as much as the money, that will talk to Wall Street.


does very few technology investments in a year and is noted for their

incredible due diligence," says Princeton eCom spokesperson Tom


"Lazard has a rich history of investing in exceptional


says Manu Rana, vice president of Lazard Technology Partners. "The

company’s next-generation payment and presentment products offer


achievable value. Princeton eCom is poised to enhance its leadership

position in the emerging bill presentment and payment market."

Previous investors who contributed a total of $21 million were New

Century Equity Holdings (NCEH), Mellon Ventures, the private equity

partnership of Mellon Financial Corporation (MEL), and Terra Lycos

Ventures L.P., a venture capital firm associated with Terra Lycos

Inc. (TRLY).

Princeton eCom’s interim CEO Craig Kirsch, who comes from the San

Antonio-based New Century Equity Holdings, believes the latest round

of financing will provide large billers and banks with the assurance

of financial stability they require. "This financing provides

us with significant financial resources as we bring online powerful

new technologies that will clearly enhance Princeton eCom’s industry

and technology leadership," says Kirsch.

Princeton eCom was the first company to present a bill on the


Founded by Don Licciardello as Princeton Telecom to process electronic

payments for bank clients, it provides integrated electronic bill

presentment and payment services to some of the country’s largest

utility, telecommunications and financial services consumer billers,

including about 20 Fortune 500 companies. It also offers a "Pay

Anyone" payment processing service to more than 1,400 banks and

financial institutions, including eight "super regional"


Between December, 2001, and March, 2002, the average number of payment

transactions processed by Princeton eCom increased by about 1 million

payments per month, up to 4.5 million. It added nine new biller


for a total of 83, including those that require telephone presentment

and payment. It presents more than 750,000 bills online through biller

direct websites and handles more than 1 million telephone bill


In addition to its core billing and payment services, Princeton eCom

also offers electronic collection and one-time-payment services as

well as electronic balance transfer services.

Princeton eCom is on good terms with Paytrust and has a strategic

agreement to deliver electronic bills for distribution to Paytrust’s

customers. COO Ron Averett says that the project was scheduled to

be completed this fall and that he believes that the project will

go forward.

Last year Princeton eCom tried to enter Paytrust’s space, to offer

direct interface with consumers, by acquiring Quicken’s Bill Manager

service. Then it backed away. "Everybody who does online bill

payment loves it, but there were not enough to stay in that


says Healey. "We purchased it but shelved it."

For now, Princeton eCom focuses on its core business. "The


burn rate was substantially reduced in the first half. We have fewer

employees, about 200, because our computer processing for payments

is more efficient," says Healey. "Together with cost control,

we have increased business."

"We expect to be cash flow positive in the second half of the

year," says Healey. "That means that most of the Lazard


will be on the books as an asset at the end of the year. As we move

up the chain to larger billers, that will be important. We have been

adding financial institutions in record number, but generally


they were regional ones."

Princeton eCom Corporation, 650 College Road East,

Princeton 08540. Craig Kirsch, interim CEO. 609-606-3000; fax,


Home page:

Top Of Page
Trintech’s Payment Software

Trintech is the fourth company in Princeton’s online

payment lineup. Not a headquarters, it develops software for an


commerce firm based in Dublin, Ireland. Rather than offer turnkey

solutions like Paytrust and Princeton eCom, it supplies card payment

software and electronic products for bankers and retailers.

This software development office was set up with a handful of former

PlasmaPhysics engineers, had grown to 31 people in more than 6,000

square feet. Now it has 15 to 20 workers, says software engineer Kevin

McGuire, the oldest of three brothers who founded the firm (U.S. 1,

December 3, 1997). This office works on banking software, acquiring

and issuing credit card software, dispute resolution software, and

web-based payment applications.

Trintech recently bought GlobeSet, a Dallas-based firm that has a

successful cash payment reconciliation product.

Trintech (TTPA), 5 Independence Way, Princeton

08540. John Cahill, executive vice president. 609-919-6000; fax,


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