AmEx, AT&T, and Prodigy Eye Bill-Payment Market

Automated bill payment for consumers, a service that many financial institutions launched in the 1980s with dismal results, is being revived - but, this time, not by banks.

American Express and AT&T are looking at jumping into the business, which helps consumers pay their household bills electronically from home. Meanwhile, Prodigy Services Corp. - a firm jointly owned by Sears Roebuck and Co. and International Business Machines Corp. - has decided to expand its bill-payment service.

Prodigy, an information network that provides a variety of on-line services to consumers with personal computers, plans to announce Tuesday a program that will allow more of its customers to pay their bills electronically without writing checks. The expanded service could be used to pay mortgages, utilities, and telephone charges, among others.

The services from American Express and AT&T - which would allow consumers to pay bills via push-button telephones - are in the preliminary planning stages, according to sources.

|A Competitive Issue'

"The gauntlet is down," said Bruce Burchfield, chief executive officer of National Payment Clearinghouse, a company that licenses software to banks which allows them to offer customers electronic bill payment services. "There's a competitive issue here: Do the banks do this or does someone else?"

A spokesman at American Express acknowledged that the company is looking at a bill payment service, but declined to provide details of its plans.

An AT&T executive in its consumer communication division, in Basking Ridge, N.J., denied that the long-distance company is considering a service.

Two knowledgeable sources said, however, that AT&T began exploring bill payment last year but has not decided whether to go ahead. They said AT&T is leery of further riling bankers, who are already angered by the AT&T Universal card - the company's highly successful credit card.

Nonbanks Firmly in the Picture

Some nonbank firms already offer home bill-payment products. Checkfree Corp., Columbus, Ohio, markets software that customers use to pay bills from home on their personal computers. Western Union also has a bill payment service.

Banks have had little success with home bill-payment services because of high back-office expenses, low consumer demand, merchant resistance, and low-quality services. Some have abandoned such programs, while others keep trying.

Citicorp, for example, has several different services that allow customers to pay bills from home via telephone or PC. The bank is also testing a home banking service with 324 customers in New York that uses a customized telephone with a small screen.

Huntington Bancshares, Columbus, Ohio, plans to launch a home banking program later this year that customers will access from home using an specialized telephone from AT&T similar to Citibank's.

Prodigy's Differences

Some Prodigy customers can already pay bills, transfer funds between their bank accounts and perform other routine banking tasks through a service offered by banks that have agreements with Prodigy. A few dozen banks, including Manufacturers Hanover Trust Co., New York; Banc One Corp., Columbus, Ohio; and Wells Fargo Bank, San Francisco, have such agreements.

But the new service will be open to any Prodigy customers, regardless of the institution where they do their banking.

Prodigy is offering the service initially to half of its one million customers, mostly in large cities. The basic service will cost $9.95 a month, plus Prodigy's regular $12.95 monthly fee.

"One of the beauties of the service is that customers don't have to change banks to get it," said Michael D. Greenbaum, director of the banking market for Prodigy. "Our research has shown that bill payment is a very popular service among customers that use Prodigy's home banking service."

Role for Hanover

The payments will be processed by Manufacturers Hanover Trust, which already does the processing for a number of Prodigy home-banking programs, including those of Core-States Financial Corp.'s Philadelphia National Bank and Comerica Bank, Detroit.

The bank disburses payments to merchants, either electronically through the automated clearing house or by sending a paper check, while simultaneously debiting customers' bank accounts. Manufacturers now processes payments for 50,000 merchants, including most major credit card, oil, department store and utility companies.

The bank has been eager to expand its role in processing transactions for Prodigy customers, which will allow the bank to increase fee-income.

Added-Value Scenario

"The added value for us is that we can use our existing back office infrastructure to grow our transaction processing fee-based business," said James Bauer, vice president of electronic banking at Manufacturers.

Though the Prodigy service will compete with home-banking programs, Mr. Bauer said it "does not diminish the value of home banking" because those customers can also check, balances and transfer money between accounts.

"I want to be sure that Prodigy is going to be around," said John Russell, vice president at Banc One. "They need revenue streams; and if this helps, it's good for the Prodigy banks."

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