Intelidata Exec leans Heavily on Private Banking

Intelidata executive vice president Joseph Smith is a banker's dream - a Norwest Bank dream.

In the much-sought-after "wallet share" department, Minneapolis- based Norwest has a 100% hold on Mr. Smith. Even after moving from Milwaukee to Intelidata's Washington-area headquarters to head the electronic commerce division, he stayed with Norwest.

"If a bank says, 'We'd like to put you in private banking,' they probably won't lose you," Mr. Smith said, referring to his Norwest relationship. "The concept of private banking is important. It means that someone pays more attention to you and they sell you more products."

Now Mr. Smith wants to help other banks carry the private banking model into the electronic world, taking advantage of Intelidata's technology to reduce the cost of delivering personalized service to a broader, if not a mass, market.

Norwest is not one of his customers. But many other banks are, including First Union, Comerica, and Central Fidelity.

Intelidata has been selling remote banking services to financial institutions since its predecessor, U.S. Order, was founded as a home shopping system in 1990. It learned early on the danger of trying to "disintermediate" banking customers.

U.S. Order's original business plan called for it to be a grocery shopping service based on founder William F. Gorog's view that in the next step of the transaction revolution, the point of sale terminal would move into the home.

The "Scan Phone" for supermarket ordering elicited favorable customer responses - but it never got beyond 10,000 users. U.S. Order began searching for other applications.

Could home banking be the ultimate answer?

Among test users, "90% used the phone for banking transactions, and 75% for bill payment," Intelidata president John C. Backus said of a 1992 experiment in San Francisco.

But "people didn't know who U.S. Order was," said Mr. Backus. "When it comes to paying bills, people want someone they can trust."

The company teamed up with Visa International, which at first declined to develop the back-end system that would execute telephone-based bill payments. With the growing prominence of nonbank players like Checkfree and Intuit, Visa's board changed direction in 1994 and negotiated with U.S. Order to transfer the payment processing "engine" - with 64 of its staff - into the newly formed Visa Interactive division.

"We didn't want to be a processor," said Mr. Backus. "I believed then and I still believe today that there will never be a successful third- party processing company that actually moves the money from customers to a biller. Banks won't let nonbanks do the work."

While Intelidata's new electronic commerce division prides itself on its ability to connect banks to a variety of payment processors, it is clear that Visa still exercises a strong influence on its approach.

"We want to help Visa become successful," said Mr. Smith. "My goal is to have the bank brand constantly reinforced."

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