ALFRED DOMINICK JR. - INTELIDATA TECHNOLOGIES CORPORATION (INTD)
CEO Interview - published 01/05/2004

DOCUMENT # WAH606

ALFRED S. DOMINICK JR. is Chairman and Chief Executive Officer of
InteliData Technologies Corporation, and serves on the InteliData Board
of Directors. Mr. Dominick came to InteliData in 1998 from Metavante
(forming M&I Data Services, a subsidiary of the Marshall & Islley Corp.
with revenues in excess of $500 million. His responsibilities included
the strategic direction and executive management of four strategic
business units. These four business units ' home banking, electronic
funds transfer, branch automation and bankcard ' provided innovative
products and services to over 900 banks and represented over $125
million in revenue. He was Executive Vice President of Retail Banking
and a member of the Management Committee for Boatmen's Bancshares Corp.
(now NationsBank) for three years. He began his banking career at New
England Merchants National Bank (now Fleet National Bank). He was also
with Shawmut National Bank of Boston for over 14 years as a Senior Vice
President. In 1989, he joined Bank One Texas as an Executive Vice
President responsible for retail banking for the State of Texas. During
his career, he has been responsible for managing the marketing and
advertising functions as well as indirect lending, mortgage banking,
credit cards, call centers and electronic funds transfer areas. Mr.
Dominick holds a BS in Applied Sciences from Boston University, where he
graduated cum laude. 

Sector: application software

TWST: Would you give us an overview of InteliData Technologies?


Mr. Dominick: We are a technology infrastructure company for banks. We
develop and implement software which can be operated as an in-house
solution as well as in an outsource environment for organizations that
want to offer bill payment and presentment to their clients. We've been
in business since 1990 and we enjoy relationships with 20 of the top 50
financial institutions. We're uniquely positioned to be a dominant
provider of technology for the bill payment marketplace based on our
experience and our client base.

TWST: Are the banks your only customers?


Mr. Dominick: The entire financial services market is our primary
market, which consists of not only banks, but S&L's, credit unions and
financial processors. We focus our direct sales efforts on the top 100
banks, and we penetrate the community bank and the credit union market
with alliance relationships that service those particular market
segments.

TWST: What about the products that were introduced for the credit card
sector? Are you now de-emphasizing that area?


Mr. Dominick: Not at all. I think of the credit card sector as part of
the bill presentment side of our business. What we provide for the
credit card market is a suite of applications that enables card issuers
to reduce their operating costs and increase revenue by enabling
cardholders to manage their accounts on-line, receive their statements
electronically, request line extensions and consolidate balances from
other credit card accounts.

TWST: Could you give us a sense of the base of adoption of technology,
as far as bill payments are concerned?


Mr. Dominick: There are two points of adoption. In the credit card
sector, adoption for cardholders looking at their bills and paying them
is higher than any other type of bill payment. We see adoption as high
as 40% of the card base of some of our customers, because all of us want
to see our credit  card statement, what transactions have been posted,
how much credit is available, and we want to be able to make a timely
payment to avoid late fees. On the 'pay everyone' bill payment side, on
the other hand, adoption has been a little slower as banks have
questioned how aggressively they want to promote their bill payment
services, and then have struggled with the economics. However, over the
past three years the promotion of bill payments  by banks has increased
significantly, influenced by Bank of America which has been aggressively
promoting free bill payment for about a year and a half now. If one
looks at the data that has been released by Bank of America, their
penetration has been simply incredible and they are leading the industry
in creating awareness and demand. So now we see bill payment starting to
come of age, primarily influenced by the leadership of some of the
larger organizations that are promoting this service for free.

TWST: How is the business pipeline evolving? What are some of the large
bank  procurement activities that look encouraging to you?


Mr. Dominick: The good news is that we've been focused on this pretty
extensively for the past three years and, in fact, we've put about $30
million of research and development into building a solution for banks
to utilize in providing next generation bill payment services. We've
seen the market evolve as well.  Initially, banks made the decision to
outsource bill  payment processing to third parties like CheckFree,
Metavante and Princeton eCom. Now, as they've seen adoption increase,
they've concluded that outsourcing is not an economical way of offering
the service, particularly as they've concluded that bill pay must be
offered for free as a result of competitive pressures. So they are now
looking extensively at what alternatives there are to bring some or all
of this in house so that they have the ability to control both the cost
and the service quality.  As a result, what we've found is that our
pipeline has never been more robust with banks that view bill payment as
a strategic initiative and one that they need to make infrastructure
invests in to ensure that they can deliver the service with the quality
and the price performance that they need. Again, I think it's a function
of the service maturing and adoption increasing which is causing banks
to look for alternatives. Frankly, we have the only in-production
alternative available in the market.  Banks such as Wachovia, Washington
Mutual, USAA, National City, BB&T all use  our payment warehouse with
large numbers of customers. We probably have, at the largest
organization, well in excess of a half million users on our system, so
we can demonstrate a production system that is both very scalable  and
very reliable.

TWST: This is a very competitive field, and so what would you consider
to be  your distinguishing feature?


Mr. Dominick: Primarily it's the intellectual capital we've developed
over the past 13 years and the fact that we can deliver either a total
end-to-end  standalone solution or an application that fits seamlessly
with a bank's existing Internet banking infrastructure. We can also
deliver our solutions as a licensed application or we can deliver them
as an outsource application. One of the distinguishing features for our
clients is that many of them have elected to outsource to us initially;
then, when they get sufficient competency and scale, they bring it in
house. We've done that recently with several of our large customers. So
we're able to give them the kind of flexibility and the price
performance that they're looking for.

TWST: Have you seen any meaningful portfolio improvement in your credit
card  sector?


Mr. Dominick: We've seen a lot of improvement in the credit card sector,
primarily spawned by continued adoption by the credit card consumer. We
continue to be pleased and amazed at credit card holders' interest in
using our application to manage their accounts, which in turn increases
our revenue stream from our existing customer base.

TWST: In your recent announcement of earnings, you expressed
disappointment with the credit card product offering and your
relationship with FNIS. Could  you address those issues?


Mr. Dominick: There are two points. In the credit card sector we've been
disappointed that the prospects we've had in our pipeline have been slow
to make decisions, which has been caused primarily by the softness in
the credit card market. As many of the card issuers are struggling with
portfolio profitability, they have not been able to focus on incremental
functionality that might help them because they've been struggling with
reducing their expenses and have taken somewhat of a short-term view.
Fortunately, our existing customers have been increasing the number of
users  on our systems, which has helped to grow our revenue from that
sector. But it's been disappointing that we haven't been able to get
incremental new business. That's something we hope will change as the
economy starts to pick  up and issuers start to look at innovative ways
to increase their earnings. On the second front, with Fidelity National,
we actually have three relationships with them. One is a joint marketing
relationship, another is a  hosting relationship and another is a
license relationship. We've been particularly disappointed that the
joint marketing relationship has not been  as successful as we
anticipated two years ago when we entered into the agreement. We're
working hard to clarify our relationship with them going forward, and I
continue to be cautiously optimistic that the spirit of the relationship
of generating joint business development efforts will in fact start to
see some momentum. Unfortunately right now, I can't point to any.

TWST: Could you lay out your strategy for success as you look ahead?


Mr. Dominick: Our strategy continues to be ruthlessly focused on
providing best-of-breed payment solutions. We're working very closely
with some large organizations that are very interested in seizing
control of the bill payment activities that they have been abdicating to
third parties. As we move through decisions and contract issues, I think
it will be obvious to the marketplace and to our investors that the
investment that we've made over the past three years is going to
generate the returns that one would expect.  We continue to work with
several other alliance opportunities (one in the branch automation field
and one in the bill aggregation field) to broaden our appeal and our
leverage with organizations that may have such technology installed and
that want to leverage that infrastructure. But we continue to be focused
pretty exclusively on bill payment and presentment.

TWST: What events would you characterize as successful for your company
over  the next couple of years?


Mr. Dominick: First of all, our ability to demonstrate our lease-cost
routing capability for bill payment. We're in the very infant stage of
being able to demonstrate to three of our large organizations that are
sending us transactions for us to least-cost route payments to multiple
payment endpoints. As that evidence becomes clear, it will help provide
the confidence and the economic benefit statement to prospects that are
looking at this solution over the next couple of years as we continue to
add new business and new prospects. I think it will evidence that we are
establishing ourselves as the industry standard for bill payment
technology that enables banks to connect directly with one another for
routing transactions between the biller and the consumer.

TWST: Could you share with us your short-term financial outlook and your
long-term financial goals?


Mr. Dominick: I think the short-term financial outlook is somewhat
skewed as  we are transitioning from a company that was dependent on
legacy revenue from our Internet banking business, which is decreasing,
to one that has increasingly oriented to payment revenue, which is
increasing. There may just be a simple timing gap between one replacing
the other. Longer term, my expectation is that this company has the
capacity to be a $100 million revenue company with a high degree of
profitability, based on the margins that we would expect to achieve and
given the technology we've developed.

TWST: Besides the economy, what would you consider to be some of the
obstacles or challenges?


Mr. Dominick: Probably the biggest obstacle outside the economy is the
banking industry's risk averseness and the time it takes for an
organization  to make a decision and to implement that decision.

TWST: What would you consider to be the strengths and advantages of your
management team?


Mr. Dominick: I think the strength of our management team is the
maturity of  it, as well as its ability to maintain focus and direction
and not react to short-term challenges. We have a tremendous amount of
patience and the ability to see through short-term challenges and I
think that is the most compelling advantage that we have as a management
team.

TWST: Is your stock as well understood in the financial markets as you
would  like it to be?


Mr. Dominick: We are somewhat of a mystery company because we don't fit
into  a profile easily. We've made a transition from being an Internet
banking company to being a payment company and I think there is still
some naivet‚ about what it is that we do and how we will generate
revenue and profits for  the shareholders in the long term.

TWST: Is your balance sheet well positioned for your comfort and do you
expect any short-term changes?


Mr. Dominick: Our balance sheet is quite well positioned. At the end of
the third quarter, we had about $8.5 million in cash. We had no long-
term debt, and if you look at the characteristics of successful
companies, they tend to  be companies that do not have debt and have
adequate capitalization. For the  year to date, and through the end of
the third quarter, we had only used $750,000 in cash, so as you can tell
our burn rate is pretty modest. Frankly, we expect to be cash flow
positive and profitable in 2004. The thing that I feel good about on our
balance sheet is that we've got a strong, recurring revenue stream,
we've got a very controlled expense base, and we have a great customer
base which contributes to that balance sheet.

TWST: As far as your investor relations are concerned, do you have any
special programs to get your message out to shareholders?


Mr. Dominick: We've actually kept our heads down and have not tried to
promote the company until we had enough evidence to demonstrate why we
are a  solid investment. So we'll probably not be doing much until the
first or second quarter of 2004 after we have closed on some new
business deals and we have enough evidence about our success in lease-
cost routing to bring an IR program to the marketplace.

TWST: If you were speaking directly to your shareholders, what would be
some  of the key investment messages you would send?


Mr. Dominick: I would say that we are uniquely positioned in the payment
space to be the infrastructure standard for the industry. The
investments that we've made over the last three years are starting to be
implemented and  they're tangible. One needs to have patience and a
long-term view about the payment systems, and to the extent that you
understand that the banking industry's last remaining franchise is the
payment business, you would be encouraged that we are uniquely
positioned to provide the technology to the industry to maintain that
franchise.

TWST: Thank you. (WT)


ALFRED S. DOMINICK JR.
 Chairman, President & CEO
 InteliData Technologies Corporation
 11600 Sunrise Valley Drive
 suite 100
 Reston, VA 20191
 (703) 259-3000
 (703) 259-3100 - FAX
 www.intelidata.com

Copyright 2003 The Wall Street Transcript Corporation
All Rights Reserved


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