How ECHO Fits Into Intuit’s ‘Single Payments Portal’ Strategy

Mutual need brought Electronic Clearing House Inc. (ECHO) and Intuit Inc. together in the $142 million deal, announced last week, that will make Camarillo, Calif-based processor ECHO part of Intuit, Mountain View, Calif., some time in the first quarter (Digital Transactions News, Dec. 15).

Intuit, marketer of the popular QuickBooks accounting software for businesses, needed an automated clearing house and check-services capability for a so-called payments portal it is building. Meawhile, ECHO, a processor of card, ACH, and check-verification transactions, had been pursuing a strategy of marketing its services through technology companies serving small businesses, and saw Intuit as the next big opportunity.

“We did not have a relationship with Intuit, but we were talking to Intuit” about a marketing agreement, talks that ultimately led to the decision to be acquired, says Chuck Harris, president and chief operating officer at the 25-year-old, publicly held ECHO. The deal is subject to regulatory and shareholder approval.

Having acquired Innovative Merchant Solutions (IMS), an independent sales organization, in September 2003, Intuit had already added credit and debit card processing capability, but it saw its business clients casting wide nets with various providers to process ACH payments and do check verification and guarantee. That complicated their ability to monitor their cash position. “Can they make payroll? Do they have money to invest in their businesses? We wanted to integrate that with QuickBooks and with online banking,” says Dan Wernikoff, director of product management for IMS. That ambition required Intuit to acquire not just ECHO but Digital Insight Corp., an online-banking processor, which it agreed to buy last month for $1.35 billion.

Intuit, whose accounting programs are used by 6.7 million small businesses, plans to merge ECHO with IMS. It’s also at work on its payments portal, which it says will give users a comprehensive view of payments and cash position at any given time. “The portal is a self-help tool,” says Joe Kaplan, president of IMS. Users will also be able to accept a wider array of transactions as a result of ECHO’s capabilities. And customer service will be simplified. “We’ll have one application process, one boarding process, one 800 number, one statement, so [our customers’] experience isn’t calling three or five different people at the end of the day” says Kaplan.

Wernikoff says the portal is in its early stages. Intuit, he say, hasn’t decided whether it will carry any additional fee, but, though it will it will be embedded in QuickBooks, it will be available to non-users of the software on a standalone basis. “The portal could act as a mini-accounting package for some of these guys,” he says.

With ECHO, Intuit will gain not only ACH and check capability, but also relationships with 60,000 merchants, including both physical retailers as well as those doing business by phone and on the Web. Indeed, about 75% of its $1.78 billion in annual card dollar volume stems from card-not-present transactions.

At the same time, both ECHO and Intuit see growing opportunities in ACH, which accounts for 13% of ECHO’s revenue. In particular, they are eyeing the new back-office conversion transaction type, which will go online in March and will permit merchants to convert checks in batches in central locations rather than in-lane. “We still see a lot of greenfield [opportunity] for us to enjoy” in ACH, says Harris.