Intuit, Pulling Out of On-Line Banking, Selling Business to Checkfree

Intuit Inc. announced Monday that it has agreed to sell its pioneering on-line banking and bill payment processing unit to Checkfree Corp. for $227.6 million in stock.

The sale of Intuit Services Co. would essentially close the book on Intuit's involvement in processing home banking transactions associated with personal financial software. It might also help Intuit make the case that it is a friend to banks.

For Checkfree, it would be the latest in a series of acquisitions that have transformed the Columbus, Ohio, company into a broad-based provider of electronic commerce systems.

If the acquisition of Intuit Services is completed by year's end, as expected, Checkfree would provide home banking and bill payment services to 180 financial institutions and more than one million individual and business customers.

"This combination does what financial institutions have asked for - it creates an open, completely invisible transaction processing architecture," said Peter J. Kight, chairman and chief executive officer of Checkfree.

The deal comes at a time of realignment in the field of payment processing for home banking and related on-line transactions.

Last week, International Business Machines Corp. announced that it is joining 15 major banks to form Integrion Financial Network. The network is scheduled to begin operating a cooperative processing infrastructure for home banking next year.

The deal announced Monday would leave Checkfree and Visa Interactive as the nation's two leading processors, with Integrion on the horizon. But officials of Checkfree and Intuit played down the competitive angle.

During a news conference Monday, Intuit officials touted a separate aspect of their new business model: the "open connectivity standards" Intuit plans to publish on the Intern next spring.

Intuit executives said these standards will let any bank support home banking through Intuit's Quicken personal finance software, regardless of the payment processor used.

"We fully anticipate that Integrion, rather than being a competitor, will be an ally in attempting to get more consumers and more financial institutions doing business electronically," said Scott D. Cook, chairman and co-founder of Intuit Inc.

Indeed, many of the Integrion banks also have worked with Intuit and its processing subsidiary.

Intuit Inc., based in Mountain View, Calif., reshaped the home banking landscape two years ago by acquiring National Payment Clearinghouse Inc. for $8 million, renaming it Intuit Services Corp. and using it to process Quicken transactions. The company has spent about $40 million on the processing service, which is based in Downers Grove, Ill.

Bankers and analysts applauded the Intuit and Checkfree news, saying the consolidation would result in lower transaction fees for banks and greater access to Quicken.

"It's key for Checkfree to do exactly what they're doing, and that's to get big quickly so they can realize the economy of scale," said John A. Russell, spokesman for Bank One Corp. of Columbus, Ohio. The bank is a member of the Integrion consortium and is a Checkfree customer.

Upon completion of the deal, Intuit would hold a 23% stake in Checkfree, which this year has bought three technology companies and formed alliances with several others.

For Intuit, the move represents a return to its primary business of running a software company, said Gary Craft, an analyst with Friedman, Billings & Ramsey. "They had an overambitious strategy and way too much on their plate," he said.

Intuit's leading competitor in the personal financial software market, Microsoft Corp., Redmond, Wash., announced its own open connectivity standard earlier this year. A Microsoft spokesman, Matthew Cone, said Intuit's announcement is "a good thing."

"We've clearly motivated the industry and gotten them moving forward in a more open direction," he said.

But Paul D. Harrison, chief executive officer of Meca Software Inc., which holds third place in the personal financial software race, said he viewed Intuit's announcement in a negative light.

"I think it's a desperate move by a company that is struggling to meet an earnings-per-share goal for their shareholders," he said.

Mr. Cook acknowledged that his company's financial performance and its dimming reputation among bankers were motivating factors in the transaction.

"Many of today's announcements are directly in response to questions we've had from our financial institution partners," Mr. Cook said.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER