American Express Co. has joined four of the 10 largest bank holding companies as participants in Microsoft Corp. and First Data Corp.'s joint payment services venture.

American Express and the lead banks of BankAmerica Corp., Chase Manhattan Corp., Citicorp, and Wells Fargo & Co. were designated "founding members"-a status they share with utility trade associations and third- party providers of billing services.

Those organizations took part Thursday in an announcement confirming much of the speculation that swirled through the electronic payments industry in recent days: Microsoft, the biggest software company in the world, and First Data, the leading transaction processor, formed a fifty- fifty partnership, a Denver-based organization called MSFDC.

By early 1998, they said, MSFDC will introduce a service allowing utilities and other billers to deliver statements to consumers, and in return get their payments, entirely by way of the Internet or other electronic channels.

Given the clout of the organizers and the initial signings, MSFDC is widely seen as a positive force for what is known as end-to-end automation of consumer payments, which home banking and bill payment companies have long been struggling to achieve.

At the same time, the announcement generated critical comments from potential competitors like Checkfree Corp., and set the stage for clashes among multiple and overlapping industry alliances.

Bank of America, for example, is also allied with International Business Machines Corp. in Integrion Financial Network, which has claimed that its 16 member banks serve more than half of the retail banking households in North America.

MSFDC's endorsers could rightly claim most of the rest. Citicorp alone has some 40 million credit card households.

Officials of Hackensack, N.J.-based First Data and Redmond, Wash.-based Microsoft, who said they were working on this project nine months, cast their strategy in a bank-friendly light.

"This is the only service that recognizes the needs of all the players, and we have worked hard to design it that way," said Chuck White, First Data's president of electronic commerce payment solutions in Palo Alto, Calif.

"Everyone pays bills, no one likes to pay bills," and MSFDC "goes a long way to making it easier," Mr. White said.

"Banks play an important part in the payment process today," he added, and will "continue to play this role in the future."

"We are not trying to displace consumers from banks in any way shape or form," said Darren Remington, Microsoft general manager, electronic bill payment and presentment. "Banks have a lot of consumers, consumers have their accounts with those banks, and that's an important relationship to maintain."

Typically, customers would sign up for the service, which will be free, through a bank or by using the MSFDC Internet home page. They would be notified when bills are due when logging on through either service, and authorized payments would be directly debited from checking accounts.

MSFDC said it plans eventually to make the service available through E- mail or interactive television, and it will accept debit cards, credit cards, or smart cards.

MSFDC said it expects to roll out bank pilots within a month, in preparation for full-scale operation by the beginning of 1998.

American Express, which a spokeswoman said is considering MSFDC as a way to deliver statements to cardmembers, and the banks are joined on the advisory board by the American Gas Association, Edison Electric Institute, United States Telephone Association, CSG Systems Inc., and International Billing Services.

The last two print statements and provide other billing and mailing support to major payees. International Billing, in El Dorado Hills, Calif., is responsible for the bills sent to 58% of U.S. cable TV households and for 39% of the cellular phone market, said marketing vice president Tom Roberts.

Norcross, Ga.-based CheckFree, which Mr. Remington said would be a principal MSFDC competitor, said the announcement would help speed bill presentment to the marketplace. But Checkfree spokesman Matthew S. Lewis added that Checkfree is the current leader in home banking and bill presentment.

"There is a trusted financial intermediary, and that is the bank, not some server in Denver," said Mr. Lewis. "We clearly work for the bank."

"Financial institutions need to ask themselves if Microsoft is on both ends of the transaction, are they comfortable with this," he said. He added that billers should not be required to change their accounts receivable systems or learn how to use Microsoft tools.

Visa U.S.A., which has made forays into electronic bill payments with its e-Pay system, said the joint venture, "reinforces the notion, as we have believed all along, that paperless solutions are where the market is headed."

A MasterCard International spokesman said its back-office bill processor, the Remittance Processing Service, "is the proven leader, having surpassed the $20 billion mark in total payments since 1987." MasterCard expects "RPS to continue to play a growing role in facilitating electronic bill payment."

Jeanine Brown, executive vice president of Bank of America's interactive banking division, said electronic bill payment and presentment is "something we have all been looking at."

"This joint venture is not the only one," she said. "We are looking at all the options ... A lot has to be tried out and tested on the consumer."

Paper bills will not disappear overnight, she added.

While not commenting specifically on the numbers of consumers it expects to reach, Microsoft and First Data said 4.5 million households currently use on-line banking, and they expect that number to reach 13 million by 2000.

They said the roughly 100 million U.S. households pay 12 recurring bills a month, totaling 14 billion annually.

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