Checkfree Corp. has joined with Automatic Data Processing Inc. to develop a PC-based electronic bill payment and banking service for small and middle-market businesses.

The service, to be available by the end of the year, will give businesses access to bank accounts for balance information, account reconciliation, and electronic bill payment capabilities.

"Our combined financial transaction technologies are critical to companies that want to pay anyone, anywhere, anytime, and maximize the use of their funds," said Peter Kight, Checkfree's president and chief executive officer.

While the consumer side of electronic banking currently grabs more attention, electronic banking for small businesses is a lucrative market, company officials said.

According to Oxxford Information Technology Ltd., a data base company that tracks small businesses, the United States is home to nearly 10 million companies with less than $5 million in annual sales.

ADP officials said few of these small businesses have automated their bill paying and banking."We think the potential is there," said Robert Brandes, a senior director with ADP. "Overall, there's not that much penetration among businesses with PC-banking yet."

Mr. Brandes estimated that 70% of companies with less than $10 million in annual sales use accounting software.

Bolstered by this dearth of automation, electronic banking and bill payment services for small businesses is growing by 30% per year and will represent a $4 billion industry by the end of the decade, officials at Checkfree said.

Last May, Checkfree announced its plans to develop a bill payment service to be integrated with business accounting software from several companies, including Data Pro Accounting, Peachtree Software, and Platinum Software.

In the new development project, Checkfree's upcoming service, called Commercial Payment Service, will be added to ADP's Business Express balance and information product, which is used by over 50 banks, including First Interstate Bancorp, NationsBank Corp., and Norwest Corp.

"It looks like a bank-friendly strategy that takes advantage of the Business Express product," said Nick Alex, a senior vice president with NationsBank Corp., Charlotte, N.C.

ADP and Checkfree officials claim the new small business service will eliminate the labor-intensive operations of printing and mailing paper checks and remittance data. Checkfree estimated that U.S. businesses spend $30 billion per year just to pay their bills.

Checkfree provides electronic payment services to consumers and businesses. With 31 banks and about 1,500 corporations as customers, the Columbus, Ohio-based company processed over $6 billion payments last year.

ADP, of Roseland, N.J., is the nation's top payroll processor and one of the largest bank outsourcers for cash management services. It provides transaction processing, software, and other information-based services to over 300,000 business customers.

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