First Data spins off e-payments company

It may be a little late getting in the game, but Atlanta-based First Data Corp. launched a $600 million e-payments company today called eOne Global LP.

The new company, which will be based in an as-yet-undetermined location in Northern California, will combine all of First Data's e-payments businesses under one roof, including a business-to-business payments service that is intended for use in online exchanges and a product that lets companies pay federal and state taxes electronically.

But except for the tax business, all the online payments battlegrounds are already dominated by other, quicker companies, according to Paul Jamieson, an analyst at Lincoln, Mass.-based Gomez Advisors Inc. Now, First Data has to move fast to gain ground on the dot-com start-ups.

"This is their way of playing catch-up," Jamieson said. "Quite frankly, that should have been done a year ago."

For example, the company faces competition from start-ups like Clareon Corp. in Portland, Maine, which has begun to offer payment services for the online exchanges.

"It is the small start-ups that are looking at niche innovative processes that either enhance or create a whole new segment in the online payments area," he said. "That's where the innovation is happening. It's not happening in the traditional, large payment services companies."

So First Data bundled all its disparate e-payment businesses under the umbrella of eOne Global.

For example, eOne Global's SurePay, a joint venture with Entrust Technologies, provides a way for companies to make secure payments to other businesses in online exchanges, to consumers and through wireless devices. But it won't be up and running until the fourth quarter of this year, according to Garen Staglin, president and CEO of eOne Global.

Another division is CashTax, which lets companies pay their taxes to the federal government and 20 states. It is a leader in the field, with 2 million business clients already making 36 million annual payments worth more than $1 trillion.

According to company officers, these two services are just the beginning - eOne Global will expand into a variety of other e-payments products.

"We found out that the marketplace is so huge that we can't keep up with all the opportunities," said Ric Duques, chairman and CEO of First Data. "The formation of eOne will accelerate our dominance of this space."

One area that eOne Global plans to move into quickly is person-to-person e-payments. Currently, the leader in this space is Corp.'s PayPal.

"Our [ person-to-person] gateway platform is already alive, and we will be entertaining commercial relationships with that ASAP," Staglin said.

On the business-to-consumer side, eOne Global plans to have Yclip operational in the fourth quarter of this year. This is an advertising product that lets businesses send electronic coupons.

So far, eOne Global hasn't announced any plans to move into electronic-bill presentment and payment, a field currently dominated by CheckFree Corp.

Ironically, First Data had its own product that let customers pay bills online - TransPoint - but sold it to CheckFree earlier this year.

First Data will own 75% of the new company. The other 25% will belong to iFormation Group, created by Goldman Sachs Group Inc., Boston Consulting Group and General Atlantic Partners to back online businesses. IFormation is putting up $135 million in cash and will also help with recruiting and offer other expertise.

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