IBM is partnering with ACI Worldwide to develop an electronic payments system that will run on IBM's mainframe computers and software, the companies announced on Monday.

ACI will optimize its payments processing software to run on IBM's System z mainframe, DB2 database, WebSphere middleware, Tivoli management software and Crypto-chip technology, the companies said. ACI will also host its software in IBM's data centers, for customers who want an on-demand payments system.

ACI's software is used by banks, large retailers and payment-processing companies for managing retail and wholesale payments. Today, many of those companies use a tangle of legacy systems to handle their various transactions and services.

The alliance will give them a way to consolidate those services on IBM's powerful mainframe computers, and employ the SOA (services oriented architecture) model to reuse services that are common to both retail and wholesale payments, said Charles Linberg, ACI's chief technology officer.

The goal is to help customers consolidate the myriad of payment systems they are using and cut out some of the complexity, he said. As part of the deal, IBM will receive warrants to buy up to 8 percent of ACI's outstanding shares, the companies said.

The deal appears to be a win for IBM over Hewlett-Packard, whose NonStop Kernel Systems were for a long time the only platform supported by ACI's payment processing software, called BASE24. BASE24 is nearing the end of its life, and ACI is encouraging its customers to switch to a new, cross-platform version called BASE24-eps that it began developing about a decade ago.

"We will still support the NonStop Kernel environment, but we believe the best opportunity for our customers is the z Series," Linberg said. "Many of them already have z Series, and frequently for customers with the NonStop Kernel Environment, the only application running on it is ours."

The companies will establish "migration factories" in the next few months staffed where IBM and ACI staff will help customers migrate to IBM's servers and software, said June Felix, general manager of IBM's Banking Solutions division.

She called it a significant deal for IBM that will help drive new business for its mainframe computers.

Separately, ACI also reported its preliminary financial results on Monday for the quarter ended Sept. 30. Its revenue declined about 4 percent from a year ago, to US$84.7 million, and the company also lowered its revenue forecast for the year ahead, citing a backlog of deals.

It hopes to find new business partly through hosted payment services. ACI offers hosted services in North America today, and it plans to expand them worldwide through the deal with IBM, Linberg said.

The companies didn't disclose the value of the contract, which Felix said is for five years. The companies will jointly market and sell ACI's system, and ACI will "extensively" increase the number of IBM engineers it has, Linberg said.

ACI's customers include more than 110 of the world's top 500 banks, including ING Bank, the State Bank of India, Bank of America and First Data.

ACI expects to have finished optimizing BASE24-eps for IBM's mainframes and software by the end of the first half of next year. The companies are also working on fraud detection technologies, and a wholesale payments product for companies in the Single Euro Payments Area (SEPA).

Later they will work on smart card management, dispute management, online banking and a payment hub implementing IBM's Payments Framework, they said.