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
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 OnlineBankingReport.com. "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
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, PayMyBills.com. 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
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
"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."
08648. Glenn Hazard, chairman and CEO. 609-720-1818; fax,
Home page: www.paytrust.com
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
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."
50, Princeton Junction 08550. Flint Lane, president. 609-580-0050;
fax, 609-580-0041. Home page: www.factorsystems.com
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
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
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 08540. Craig Kirsch, interim CEO. 609-606-3000; fax,
Home page: www.princetonecom.com
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.
08540. John Cahill, executive vice president. 609-919-6000; fax,
Home page: www.trintech.com
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