Spillover Seen from Microsoft-1st Data Venture

The joint venture formed by Microsoft Corp. and First Data Corp. could indirectly boost the fortunes of a number of bank technology vendors.

Although MSFDC, as the Denver-based bill-payment services company is named, could be a formidable rival to other information service providers, it also could accelerate acceptance of electronic payments simply by virtue of the founders' pedigrees.

If the venture succeeds in familiarizing larger numbers of merchants and consumers with the benefits of electronic bill presentments and remittances, other vendors are likely to benefit.

"You are seeing a new business model being set up in the consumer-to- business marketplace," said Gary Craft, analyst at Robertson Stephens & Co., San Francisco.

Mr. Craft and other observers listed several electronic billing efforts that could be affected by the birth of MSFDC in late June:

National Processing Corp., Louisville, Ky. is testing an electronic billing service, VirtualBill, with an oil company and a utility. The test should conclude within 60 days.

Intuit Inc. has teamed up with Just in Time Solutions, a San Francisco- based software vendor, to develop electronic bill presentment services for merchants.

Electronic Funds and Data Corp., Bridgehampton, N.Y., is working on Billsite, an electronic repository of customer bills with hypertext links to the biller's Web site. Online Resources and Communications Corp., McLean, Va., is helping to develop Billsite.

Electronic bill-payment efforts hinge on the merchants, or billers. As more agree to accept electronic bill payments, banks and consumers are seen as more likely to embrace the services.

The allure of electronic billing for merchants is clear. They can cut into the more than $10 billion they spend annually on statement printing and mailing. And by collecting payments electronically, they can improve their accounting and cash flows.

William Arabio, director of information services at Suffolk County Water Authority, a quasi-public utility in Oakdale, N.Y., said he learned of electronic bill presentment last year and his interest was piqued.

The utility, which serves 326,000 households on New York's Long Island, is about to launch an electronic bill payment program with Billsite.

Electronic billing "is cheaper for us, and that's the main reason we are doing it," Mr. Arabio said. He said it should reduce costs in that area by about a third.

Mr. Craft named several other companies that could become prominent players in the electronic bill presentment market, including Billing Concepts Corp., CSG Systems International Inc., and USCS International Inc. The last two were among the first advisory board members signed by MSFDC.

"You almost never hear about these companies, but they could play a huge role," he said. It will be "the biller who ultimately decides" who will be a winner.

Though MSFDC certainly will play a significant role, many billers may opt for "a nice little software package" from another firm, Mr. Craft said.

He said the market for bill payment services could rise to about $1.5 billion within five years. U.S. consumers pay about 15 billion bills a year.

The jockeying for position has implications for banks, of course. Most noticeably, BankAmerica Corp. signed on the advisory board of MSFDC while keeping a hand in Integrion Financial Network, the 16-bank home banking consortium that revolves around International Business Machines Corp.

Microsoft and Checkfree Corp. are courting banks on the presentment front and are jointly endorsing a standard called Open Financial Exchange. Integrion is promoting its own technical standard, Gold.

Most banks are either waiting for an obvious leader to emerge or are striking relationships with multiple partners.

"Banks are hedging their bets," said Catherine A. Allen, chief executive officer of the Bankers Roundtable's Banking Industry Technology Secretariat. "It's part of trying to understand what is going on."

Nick Alex, senior vice president at NationsBank Corp., said the banking industry must forcefully define its role in the process.

"There has to be a standardization and shakeout of all these initiatives," he said, adding that he supports the formation of a bank- sponsored network for electronic bill presentment.

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