More than a dozen financial software firms have settled in Princeton, perhaps because of the Merrill Lynch headquarters, perhaps because of Princeton’s proximity to Wall Street. Together, they employ more than 600 people. Princeton eCom, aka Princeton TeleCom, recently bought by Online Resources, is among the largest, second only to Princeton Financial Systems.

It was founded in 1984 by Don Licciardello, a quantum physicist at Princeton University, and some of his graduate students — Chuck Whitmer, David Weiss, and Nathan Myrvold. The students went on to be early employees of Microsoft. (Myrvold was recently featured on the cover of Business Week as the “Godfather of Patents.”)

The company, however, was not based on quantum physics. “It was basic data manipulation,” says Licciardello. “I saw the input, knew the output, and kept geeking away, until it worked.”

The company’s very first contract was to construct a home-banking program for United Jersey Bank (now Bank of America), but the concept was too early for 1984, so Licciardello moved on to a “business-to-business” business.

He came up with a way for banks to capture electronic payments from large billers such as utilities and telephone companies. “Banks who captured these electronic payments had no way to pay the bills so they sent ‘a check and a list,’ says Licciardello, referring to how one big check was accompanied by a list of payments to be drawn on that check. The bank would have to hire workers to type in the amounts, and the temps would make mistakes. The billers hired us to help automate” the process. His first customer was Manufacturer’s Hanover.

He and his cohorts made datafiles for mainframe computers that looked, to the accounts receivable system, like the traditional lockbox, which consisted of papers that were loaded up to a file. “We made a file that looked like that, and we did that for each individual biller. We took the bank data, massaged it into the file, and daily posted it to the bank host. Then we simply wired the money to the billers’ bank account.”

Their formidable competition included Georgia-based CheckFree and a partnership between Microsoft and First Data Corporation. But Licciardello claimed his firm was the leading value added processor of electronically captured and disbursed payments, and that it had “electronic lockbox” connectivity to more than 700 national bill senders.

At that time Licciardello was saying that CheckFree was refusing to use electronic channels he had already established. “It was like requiring the biller to put in a second driveway to his house when the existing driveway is in great condition,” he said then (U.S. 1, November 5, 1997).

Princeton eCom missed its chance to go public in 1999, when it had 84 employees. Licciardello cashed out that year when new investors came in. He says he didn’t agree with the strategy to move from Class C space at Research Park to Class A space on College Road, nor with choice of the new CEO, who spent company money on a membership at Jasna Polana. “But the investors were going to put in $100 million, and I couldn’t argue with that, so I left,” says Licciardello. The new CEO lasted 11 months.

Licciardello may have been the only person to make money on the company he founded. The new management did grow the revenue, he believes, but — pointing to the $180 million sale price — Licciardello doubts that it made money for the investors. “They had deals with Intuit and UPS that were going to save the company, and I think both were bad deals.”

Last year the firm was bought by Online Resources, a 600-worker firm based in Chantilly, Virginia, that trades on Nasdaq. Robert R. Craig came in as executive vice president and general manager of E-commerce services. He has 130 employees on College Road East, and he is also responsible for a card and credit services unit in Parsippany.

Founded in 1989, Online Resources processes $75 million in bill payments annually. It offers web-based account presentation and payment services, to 3,800 clients including banks, credit unions, billers, and credit service providers. Its clients have a total of more than 8 million end-users.

The Princeton eCom purchase added 12 of the top 50 United States banks to Online Resources’ existing customers, which are regional and midsized banks and credit unions. Online Resources also acquired more than 1,600 biller customers that use the proprietary real-time payments architecture to take payments on the Internet.

Now Online Resources connects every financial institution in the United States with the largest network of billers, says Craig: “The acquisition was strategic, to extend the extensive banking network to include the biller side of the business.”

“For Online Resources there is an end-to-end connection between consumers and their banks, and banks serving consumers, and billers serving consumers,” he says, noting that his competitors are “siloed.” One does only payments, and another does only account presentation. “There are advantages to being horizontally and vertically integrated.”

Craig comes from a background of building biller companies and he has also worked with large card issuers. But he tells how he was prepared for entrepreneurship by his father, a chemist who always lectured his sons on “opportunity costs.” If the boys went to the movies, he was fond of saying, they would lose the opportunity to make money by cutting the lawn.

Unfortunately for his father, Craig and his brothers learned that lesson quite well. They earned double the family’s fee if they cut the neighbors’ lawns, so their father ended up having to mow his own.

After graduating from Lafayette College he worked at CoreStates Bank and JP Morgan Chase. He was head of business development for First Data Corporation, where he headed sales, marketing, account management and product development for remittance processing clients, including major corporate billers and card issuers.

He founded his own firm, REMITCO, in 1996, and it was bought by First Data Corp. in 2000. Now it is First Data’s paper-based remittance processing firm.

Craig believes he is on the right side of the electronic payment fence. Where his former company, Remitco, offered paper-based remittance processing, the former Princeton eCom was squarely on the electronic side. “About 65 percent pay by paper now, but that is looking to become 30 to 35 percent. The electronic payments are growing by 28 to 36 percent, and the pace will increase.”

He also believes that Online Resources has the staying power needed to keep the College Road office healthy. “Growth is our future, but it has also consistently reported positive earnings.”

Online Resources (ORCC), 650 College Road East, Suite 2000, Princeton 08540; 609-606-3000; fax, 609-606-3297. Robert R. Craig, EVP and general manager. Home page: www.orcc.com

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