Intelidata Targets Connections In Homes, Both PC and Phone

John C. Backus doesn't want to wait until the 21st century for home banking to become real.

Reflecting that impatience, his company, then known as U.S. Order, sold a custom-built bill-payment-processing package to Visa International in 1994 for $15 million in cash and royalty payments of 66 cents a month for each person using what became the Visa Interactive system.

That agreement expires Dec. 31, 2000.

"We wanted a lot more money but were willing to take a risk on the back end," Mr. Backus said. "I will really be disappointed if it takes until 2001 to take off."

The agreement with Visa's remote banking unit brought Herndon, Va.- based U.S. Order into the interactive services spotlight. It also forged an unusual relationship with Visa Interactive, essentially U.S. Order's only customer.

That close tie had its advantages. Until last September, the head of Visa Interactive was Fraser Bullock, formerly of U.S. Order. Visa recommended the company as a "preferred provider" for its member banks seeking to develop remote banking systems. The two companies still share office space on adjacent floors of the same suburban Washington building.

However, newly christened as Intelidata, Mr. Backus' company is hoping to spread its wings farther. U.S. Order acquired Braun, Simmons & Co., a Toledo information engineering firm, in October. And in November, it closed its merger with smart-phone maker Colonial Data Technologies of New Milford, Conn., to form a $125 million company that will concentrate on selling smart phones with bundled consumer services and facilitating home banking and other electronic commerce.

Robert J. Schock, chief executive officer of the larger Colonial Data, retained his title. Merger plans called for Mr. Backus, 37, president, to rise to CEO within six months.

These combinations are part of a strategy to make Intelidata a three-way electronic "connector": between consumers and their banks, between banks and payment processors, and between banks and merchants.

Intelidata officials contend their ability to support an array of consumer devices connecting to financial institutions gives them an edge in a market characterized by Internet-gold-rush fever. Intelidata takes a relatively broad and historical perspective.

"The Internet is one great access device, but it is not the only one," said Mr. Backus, speaking of the smart phones from which his reconstituted company obtains the bulk of its revenues. "I think there will be a day of reckoning" for those exclusively on the Internet.

When it comes to connecting banks to payment processors like Visa Interactive, Checkfree Corp., and the nascent Integrion Financial Network, Intelidata considers itself "in the catbird seat," said Mr. Backus. "Because we built the Visa Interactive system, we know it better. It is natural for banks to work with us."

In addition, the former Braun Simmons designed Interpose, software that runs on the mainframe computers of six of the 16 Integrion banks and Checkfree.

But it is in discussing the next frontier of electronic commerce - electronic bill presentment - that Mr. Backus' entrepreneurial juices really start flowing.

"Here is what the vision should be: You'll sit down at your computer, log in, and as you go through your E-mail, you'll see a bill from Virginia Power," he said. Intelidata plans to release such capabilities for banks and billers in the second half of this year.

"You'll reply to the sender with instructions to pay, and within 24 hours it will debit your account and credit Virginia Power," Mr. Backus added. "This is what will make electronic banking and bill payment really fly."

Although many see bill presentment as the "holy grail" of in-home financial activity, others are more encouraged by the move toward a standard electronic protocol for financial information, notably the recent move by Checkfree, Microsoft Corp., and Intuit Inc. to agree on a system called Open Financial Exchange, or OFX.

"The reality of our business is connectivity," said Intelidata executive vice president Joseph E. Smith. So Intelidata plans to offer software built around OFX as soon as it is available.

"We have the knowledge to link" different messaging sets, Mr. Smith said, "but a standard makes it easier."

Intelidata has the capacity to "translate" between a variety of formats: its own Advanced Financial Messaging Set, Visa's Access Device Messaging Set, Integrion's Gold, and the communication protocols that Microsoft and Intuit were working on separately before OFX.

Analysts said they believe Intelidata is well positioned.

"Part of the discussion among the technology companies in Open Financial Exchange (concerned) the inordinate need in the industry for connectivity," or the ability to link old-world mainframes with an Internet-oriented operating environment, said Gary R. Craft, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Va.

Intelidata "appears to have an effective, low-cost solution to let a bank customer connect to the legacy system," he said.

But aside from home banking, Intelidata will dip farther into an entirely different market: intelligent screen phones and communications services. The separation in the markets wasn't entirely obvious at first.

"We confused home banking by phone with using banks as a distribution channel for the phone," said Mr. Backus.

The company woke up to the fact after starting a telephone test in 1992 with Crestar Bank, which objected to the perception it was just giving away a new form of toaster. And consumers were often confused about whether the phone would work if they switched banks.

Yet U.S. Order was founded in 1990 around the vision that it is the telephone - not the PC - that will remain the primary remote access device for home shopping and financial transactions. Despite numerous modifications of its business model, the company remains true to that mission.

"We started making smart phones because we thought there was a vacuum" in the market, said William F. Gorog, the 71-year-old founder of U.S. Order and now chairman of Intelidata. Mr. Gorog has made wise bets before. As chairman of Worldcorp, the company that owns World Airways, he founded Lexis Data Corp. in 1968 and sold it to Mead Corp., then helped launch Verifone Inc.

In 1995, U.S. Order teamed up with Colonial Data to create a $299 device they called Inteliphone for retail sales and Telesmart for sales to telephone companies. When they merged, U.S. Order got much-needed factory capability while Colonial Data got the software it needed to break out of the business of making boxes for Caller ID services.

The phones began selling in October through more than 2,000 retail outlets, making Intelidata one of the first smart-phone companies to choose that form of distribution. The more than one million screen phones sold by Northern Telecom and Philips Electronics in North America have largely gone through the regional Bell operating companies.

Of the 41 million telephones sold last year, six million were at prices above $150, where Intelidata is competing. The number of intelligent screen and smart phones in use worldwide could grow to as many as four million this year and 10 million next year, according to a 1996 study by the Yankee Group.

With 128 kilobytes of memory, a fold-out keyboard, a modem, and a 30-character-wide screen display, the Inteliphone is really a computer for those who don't want to use one, said Mr. Backus.

In September, Intelidata launched SmartTime Network, providing stock quotes, sports scores, weather forecasts, horoscopes, and E-mail access, for $7.95 a month.

"Buying out Colonial Data was a way to consolidate their shared experience with the Inteliphone," said Wen Liao, an analyst at New York- based Jupiter Communications.

At the same time, "taking nuggets of content and packaging it with the phone seemed like a way to hedge their bets," she said.

Mr. Backus said only three simple inventions have perfectly harnessed technology to consumer demand: newspapers, electricity, and the telephone.

"Newspapers arrive, you leaf through them, throw them away, and they appear the next day," he said. "If you use an electrical device, you don't need to know if it is compatible with the current in your home. A telephone rings, and you pick it up and answer it. You don't need to press 'enter.' "

For the 21st century, Mr. Backus is angling for a perfect combination of all three.

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