SOURCE: University Bank

University Bank

October 07, 2016 15:40 ET

University Bank's PayThat Payment System Proposal to the Federal Reserve Faster Payments Task Force Profiled in American Banker Newspaper

ANN ARBOR, MI--(Marketwired - October 07, 2016) - University Bank, a wholly-owned subsidiary of University Bancorp, Inc. (OTCQB: UNIB) announced that American Banker newspaper profiled its PayThat Payment System Proposal in today's "top story" article "Small Banks Assert Themselves in Fast-Payments Debate." [see: (available by subscription only)]

Using the four innovative adoption use cases detailed in the Proposal, the entire PayThat Network would be worth $29.58 billion to $34.35 billion. Between one and eight FIs can obtain a license to own, build and deploy a PayThat node, called a PayThat Clearing Bank. If only one large or medium sized FI adopts PayThat and obtains 100% market share of the four use cases detailed in the proposal, the value of its PayThat Clearing Bank would be $28.64 billion to $32.8 billion. If the maximum number of eight FIs purchase licenses and deploys a PayThat Clearing Bank and split the market share for PayThat services equally, for a modest investment to purchase a license, they would own a fee driven business that for each of the eight licensees would be worth $3.58 billion to $4.1 billion within three years if they achieve that average market share of 12.5%.

Due to the banking industry's current regulatory environment, University Bank itself would not be able to launch PayThat without one or more larger financial institutions participating at launch as initial licensees and early adopters, since it would be discouraged from doing so by U.S. financial regulators.

The PayThat Corporation itself would be worth $940 million to $1.55 billion. One to four additional overseas FI licenses would be available that would generate significant additional value.

The key problem with any new U.S. payment system proposal is achieving adoption. We have outlined four niche adoption use cases that are compelling:

  • Use Case #1 is worth at least $1 billion for the PayThat enabled Health Information Exchange payment system proposal as the PayThat HIE services will capture a portion of the $4.5 billion off administrative costs for doctors and hospitals, private health plans, states and other government health plans that HHS has estimated can be saved by adoption of such a system over the next 10 years.
  • Use Case #2 Each of the eight PayThat Clearing Banks would own a fee driven business that would have a value of between $780 million and $1.30 billion at the end of the third year after the launch of the First Class Email product. The American Banker article focuses on this use case.
  • Use Case #3 is worth at least $1 billion for the Single Window for Cross Border Trade Facilitation & Supply Chain Billing.
  • Use Case #4 is worth $10.2 billion for the credit bureau alone and likely at least double that for the IAF.

Since the PayThat Corporation would be worth $940 million to $1.55 billion, and potentially more as international business grows, and because the cost to build the four use cases targeted by the PayThat Payment System is under $100 million, this is an attractive venture capital opportunity.

The Federal Reserve System's has launched a program of work through the Faster Payments Task Force to engage a diverse array of stakeholders in advancing the work outlined in Strategies for Improving the U.S. Payment System, published in January 2015. The mission of the Faster Payments Task Force is to identify and assess alternative approaches for implementing safe, ubiquitous, faster payments capabilities in the United States.

The Federal Reserve's Faster Payments Task Force established the Faster Payments Effectiveness Criteria, a framework that the Faster Payments Task Force will employ to assess alternative solutions for faster payments. The Faster Payments Task Force then issued a Request for Proposals that meet the Faster Payments Effectiveness Criteria.

University Bank submitted a formal proposal under the Faster Payments Task Force Request for Proposals that we believe fully meets each of the 36 Faster Payments Effectiveness Criteria. University Bank's proposal envisions the creation of a new U.S. payment system branded "PayThat". The PayThat Payment System is a bank-centric, true peer-to-peer, irrepudiatable, payment system that uses any email and text message based application platform to settle transactions and transmit associated transaction data securely even over an insecure network such as the Internet. PayThat can be used for transactions as small as fractions of a penny or as large as any amount.

PayThat uses a cash purse system enhanced with end to end encryption of data at motion and at rest. During transactions good funds are push payments pushed from user to user. Adoption use cases have been developed that will drive rapid adoption of PayThat nationwide.

PayThat uses a superior "Data-Centric" approach to encryption and a "network of networks" architectural approach leveraging XML and XML tagged data pushed to edge servers from legacy applications, extending the usefulness of legacy applications and dramatically lowering cost of adoption for innovative solutions.

An executive summary and PowerPoint are available for download at

Shareholders and investors are encouraged to refer to the financial information including the audited financial statements, strategic plan and prior press releases, available on our investor relations web page at:

Ann Arbor-based University Bancorp owns 100% of University Bank which, together with its Michigan-based subsidiaries, holds and manages a total of over $18 billion in financial assets for over 110,000 customers, and our 374 employees make us the 9th largest bank based in Michigan. University Bank is an FDIC-insured, locally owned and managed community bank, and meets the financial needs of its community through its creative and innovative services. Founded in 1890, University Bank® is proud to have been selected as the "Community Bankers of the Year" by American Banker magazine and as the recipient of the American Bankers Association's Community Bank Award. University Bank is a Member FDIC. The members of University Bank's corporate family, ranked by their size of revenues are:

  • University Lending Group, a retail residential mortgage originator based in Clinton Township, MI;
  • Midwest Loan Services, a residential mortgage subservicer based in Houghton, MI;
  • UIF, a faith-based banking firm based in Farmington Hills, MI;
  • Community Banking, based in Ann Arbor, MI, which provides traditional community banking services in the Ann Arbor area;
  • Ann Arbor Insurance Centre, an independent insurance agency based in Ann Arbor.

CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future changes in assets, pre-tax income, net income and budgeted income levels, the sustainability of past results, and other expectations and/or goals. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental, technological and legal factors affecting our operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

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