CHANTILLY, Va. – Online Resources Corporation, which provides bill payment services to over 500 credit unions, is set to acquire bill pay provider Princeton eCom for $180 million in cash. It's a significant deal in the world of bill payment. ORCC is very strong on the institution side of bill payment with a combined 900 bank and credit union clients, while Princeton eCom specializes on the biller side, such as utility companies, credit card companies and others. The combined company, which will retain the ORCC name, will serve 2,200 financial institutions and 1,600 billers, making it the largest bill pay firm in the country. It expects to process more than 200 million transactions representing $75 billion in bill payments over the next year.
ORCC CEO Matt Lawlor told Credit Union Times that Princeton eCom's strength on the biller side provides the opportunity for ORCC to add some innovative products.
"If you want to pay your mortgage last minute, which today under conventional bill pay takes two to five days, what we have had in mind in the last year or so has been expedited payments. For a $5 or $10 fee, the bill is paid in real time. We have this real time debit into the CU with the Princeton eCom biller network to 1,600 merchants or billers," said Lawlor.
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He said the CU could split the fee with ORCC. He noted it's better than calling the mortgage company and paying a fee or spending money to overnight a payment.
This is ORCC's third acquisition in the last year and a half. It acquired Incurrent, based out of Parsippany, N.J., at the end of 2004. Incurrent does account presentation for those consumers who like to go direct to biller sites, rather than from their bank or CU, to pay their bill. It has a number of large clients, including Target and Discover. Lawlor said Incurrent was a strategic acquisition because ORCC focuses on the credit union and bank side of bill pay, not the biller side. Princeton eCom is focused on the back-end of the biller model.
Its other acquisition was Integrated Data Systems, formerly a CUSO of Wescom. IDS does a lot of custom development with the Symitar System and allows CUs to offer things such as account-to-account transfer software, custom Internet banking and bill pay, and other solutions.
So which area of bill payment will grow faster?
According to Celent Communications, bill pay on the institution side is expected to grow 34% in the next few years and 28% on the biller side.
For ORCC, this deal means ridding itself of one of its fierce competitors. ORCC's toughest competitors are now Metavante and CheckFree. Metavante has a partnership with Digital Insight to offer bill pay to credit unions, while CheckFree has a relationship with PSCU Financial.
As for systems compatibility, Lawlor said ORCC plans to maintain the status quo. "We're not going to try to smash the two systems together. We like the two parallel systems. They're both J2E platforms. We'll keep our system here in Virginia and the other in Princeton and they'll talk to each other," said Lawlor.
For Lawlor, this is a watershed moment. ORCC was founded in 1989, and has quietly become a leading Internet company. It survived the Internet bubble burst in the early `90s and has steadily added financial institution clients. "Honest to goodness I think we lasted all these years and prospered because of the focus on credit unions and their needs, understanding their need to serve members," said Lawlor.
He said credit unions beat the banks in presenting data online to members through Internet banking, however banks beat out CUs on the transaction end, specifically bill payment. That has changed. In recent years, credit unions have quickly caught up on the bill pay front.
ORCC's bill pay adoption rate for its clients is triple the market's pace. Lawlor said the reason is simple-marketing. "We ran 6,000 marketing programs in the last quarter. The trick in getting a Web channel going is getting the member to look at accounts online and drive adoption," said Lawlor.
ORCC launched its consumer marketing programs in the late `90s and now has call center support and a complete direct marketing operation.
After the merger, Princeton eCom CEO Ron Averitt will lead the new firm's e-commerce business, which includes Princeton eCom's existing billers service provider business and ORCC's card, credit and real-time payments services. "The integration plan is straightforward and will deliver significant product and scale benefits to our combined clients and partners," said Averitt.
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