The evolution of electronic payments has come a long way. By 2010, Forrester projects 52 percent of U.S. online households will be paying bills over the Internet-with Gen Xers and Gen Yers comprising 67 percent of electronic bill presentment and payment users.
But 25 years ago, the idea of electronic payments was in the basement-Pete Kight's grandmother's basement. The founder and current chairman and CEO of CheckFree Corp. had what some believed a good idea: streamline payments by removing paper, automating process and, eventually, giving bank customers the ability to pay bills electronically.
If it were not for Kight's vision-helped along by Bank One's then-president John McCoy, who "loaned" Kight ACH time at the bank at night to get CheckFree off the ground-the payments revolution would not be where it is today.
This year, CheckFree celebrates its 25th anniversary, and shareholders and bankers have yet to be disappointed. What's more, the company is led with great conviction by Kight-and a refreshing, if not rare dose of humility.
Easy going it wasn't. In spite of rivals such as TransPoint (a for-profit company formed in 1997 by Microsoft, First Data and Citibank and later acquired by CheckFree) and skepticism early on among bankers, CheckFree stayed its course-blocking and tackling along the way, if necessary-through the Internet economy days. Kight's diligence and CheckFree's dominance have paid off, giving rise to a market once thought of as improbable: a world where money moves electronically.
By 2007, as little as 29 percent of consumer bill payments will be settled by check, down from 53 percent in 2004, according to Celent. The upside in payments has been electronic, and Kight is testament to sticking to one's business model and taking competitors seriously. I once asked Kight why he bothered to acquire TransPoint. "Because Microsoft was involved-and they scare me." He's also a prime example of why it matters to expand relationships with good partners-Bank of America, for example, which has a 16 percent stake in CheckFree.
For investors, CheckFree, with a $4 billion market cap, continues to deliver solid results. In January, the company announced second-quarter revenue of $215.9 million, net income for the quarter was $33.8 million, compared to $13 million for the same quarter a year earlier, and underlying net income of $41 million, compared to $33.7 million for the same quarter a year earlier. Free cash flow for the quarter was $37.7 million.
In the second quarter, CheckFree's Electronic Commerce division processed 270.7 million transactions and delivered 45.2 million e-bills; its Investment Services division posted 22 percent in annual growth, and the software division's revenue grew by 23 percent over the second quarter of fiscal 2005.
Not bad for a guy who got his start in the basement.
