A $300 Million iPay Deal Is a ‘Strong Fit’ for Processor Jack Henry

Acquisitive financial-institution processor Jack Henry & Associates Inc. on Monday said it has completed its $300 million buyout of iPay Technologies, a low-profile but fast-growing electronic bill-payment processor that will add substantial mass to Jack Henry’s already sizable bill-pay business.

Monett, Mo.-based Jack Henry provides bill-pay services to 1,050 of the 1,200 mostly small banks and credit unions that use its NetTeller Internet banking product, chief executive Jack Prim tells Digital Transactions News. “What iPay brings us is relationships with another 2,600 financial institutions,” Prim says.

Not only that, but “truly good” technology,” Prim adds. Elizabethtown, Ky.-based iPay’s services include alternative-payment products such as person-to-person payments, expedited bill payments, and various bill-pay services for small businesses. IPay has been growing at a 33% compound annual growth rate for the last five years, according to Prim. Bill Ready, president of iPay Technologies, says the company added 1,000 financial-institution clients last year. “They were a very successful type of company,” Prim says. “It wasn’t a broken business that needed to be fixed; they were doing very well.”

Jack Henry bought the ownership stakes of private-equity firms Spectrum Equity Investors and Bain Capital Ventures in the all-cash deal. Ready and his senior management team will stay on. “We’ve been a little bit of the industry’s best-kept secret,” Ready says.

The acquisition fits the pattern in recent years of bank processors buying bill-pay specialists or processors buying other processors with substantial bill-pay operations, says Gwenn Bézard, research director at Boston-based Aite Group LLC. “It’s a natural extension of what Jack Henry has been doing in core banking processing,” he tells Digital Transactions News. “IPay has carved out a niche, carved out a strong presence in the small-bank, small FI [financial-institution] niche,” he says. “That’s a very strong fit for Jack Henry.” Processor Fiserv Inc. bought bill-pay leader CheckFree Corp. in December 2007, and Fidelity National Information Services Inc. (FIS), another big bank processor, bought processor Metavante Technologies Inc., a processor with a substantial bill-pay business, last year (Digital Transactions News, April 1, 2009).

Jack Henry and iPay Technologies were no strangers to each other. IPay has provided back-end processing for Jack Henry’s bill-pay product since 2007, replacing Online Resources Corp. A year before that, Jack Henry made an unsuccessful attempt to buy iPay Technologies when its founders put it up for sale but lost out to the private-equity firms. Prim figured iPay probably would come up for sale again. “When private equity owns a company, you know it’s going to be a relatively limited time, three to five years,” he says. Prim and Ready wouldn’t say who else bid, but the acquisition is the largest ever by Jack Henry.

Last year, Jack Henry bought Goldleaf Financial Solutions Inc., a leading remote deposit capture technology provider, for $19.1 million (Digital Transactions News, Aug. 17, 2009). Prim says he’s already thinking about how Jack Henry might distribute its remote-capture services through iPay’s channels.