Like a fist through glass, Microsoft Corp. has shattered the payments world. Allying with transaction processor First Data Corp. to launch an electronic payments powerhouse called MSFDC, Microsoft has broken through a bank blockade that two years ago sent the software giant packing. Banks, accustomed to their governorship of the payments system, are now prey in a technology-driven business that they no longer control. The launch of MSFDC sent a message to the industry: Electronic bill payment and presentment (EBP&P) is coming, and banks are not in the driver's seat.

As an Internet-based payments venture, MSFDC marries the capabilities of two huge industry players with the marketing, technology and processing experience that few, if any, other partnerships could pull together. Microsoft has the technology expertise to build the EBP&P infrastructure and marketing skill to get consumer, biller and even bank buy-in. And whichever banks and merchants Microsoft doesn't win over, First Data probably has a relationship with anyhow. "If you don't trust Microsoft, then you may trust their partner; FDC has thousands of relationships with banks (and merchants)," says Leo D'Acierno, partner in Booz Allen & Hamilton's financial services group.

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