Ending months of speculation about a restructuring, the Integrion home banking consortium is paring down to three primary owners from the current 15 financial institutions.

Most of the rest will have participant-owner status in a revamped and recapitalized organization. They have the option of using Integrion technology but their capital contributions will be less than those of the top backers: BankAmerica Corp., Bank One Corp., and Washington Mutual Inc.

International Business Machines Corp., which played a key role in organizing Integrion in 1996, remains in the larger membership circle, as does Visa U.S.A., which joined when Integrion took over the Visa Interactive system.

Two companies-KeyCorp and Royal Bank of Canada-are opting out of the new arrangement, which Philadelphia-based Integrion Financial Network plans to announce formally today.

The outcome is generally along lines that observers of remote and home banking developments had been anticipating. Addressing member banks' diverging strategies and the unwillingness of some to pay requested assessments, Integrion survives with streamlined and more cohesive governance.

The shift of policymaking power toward a few, relatively large and increasingly committed institutions fits a pattern evident in other industry joint ventures such as credit card associations and regional automated teller machine networks.

Bank of America, Bank One, and Washington Mutual have committed to using Integrion's technology for home banking, will provide the majority of the consortium's second round of funding, and comprise the Integrion board of managers.

Another 10 banks, IBM, and Visa will put in significantly less capital but have access to Integrion's home banking and/or bill payment and presentment software.

The restructuring followed a call for more capital to add to the $80 million collected in 1996 to fund Integrion's vision of a shared utility for home banking. The 20 original members (before mergers winnowed the bank participant number down) had contributed $4 million each.

Integrion officials would not reveal the financial terms of the recapitalization. They said only that the total would be less than in the first round and that the second-tier group would be contributing "orders of magnitude" less than the three primary owners.

William M. Fenimore Jr., who remains Integrion's chief executive officer and managing director, said he is "very relieved" to be moving forward with the plan. "Having owners who are actually using the platform and making the decisions" would make the group "more manageable," he said.

The restructuring "certainly has the potential to streamline the decision-making process," said Octavio Marenzi, research director at Meridien Research, Newton, Mass. "But it's not exactly a ringing endorsement to go from 18 to three" primary banks.

Electronic commerce analyst James Marks of Deutsche Bank Securities in New York has blamed Integrion's and other joint ventures' problems on a "too many cooks spoil the broth" affliction.

"The more members there are, the more unlikely that agreement will be reached" about objectives, Mr. Marks has written. "From the outside, it has always seemed as if Integrion has struggled mightily with basic questions."

EDIBanx, a wholesale payments and electronic data interchange group of 16 major banks organized by the Chicago Clearing House, is one example of a consortium failure. Others have been through upheavals.

Electronic Payment Systems Inc., a joint venture of Bank One, First Union Corp., and others that operated the MAC ATM network, was recently sold to Concord EFS Inc., a transaction processing specialist. Visa U.S.A. has had to cope with recent protests from Citigroup-two top executives resigned from the Visa board over branding policy differences and the company is swinging more of its card business to MasterCard.

"Consortia are a losing proposition any way you look at it," said Avivah Litan, research director at GartnerGroup. "Either the consortium succeeds and becomes the enemy of the bank, or it doesn't succeed."

By narrowing its focus, Integrion may be better off, some observers said.

"I think Integrion will end up being successful for the couple of large banks using it," Ms. Litan said. "It's not a total loser."

"It's O.K. to acknowledge that not every bank that started with you is going to continue with you," said Christopher Musto, research director at Gomez Advisers, Concord, Mass.

Some anticipated that one or two other big banks would have been in the top ownership group. Mr. Fenimore said he expects at least two to step up as primary equity investors and board members by yearend.

Bank of America-in its former incarnation as NationsBank-and Bank One were key, early supporters in Integrion and have been using its Interactive Financial Services platform since 1997. Washington Mutual began using IFS and the Integrion bill payment engine in 1998.

Bank of America has not yet committed to using Integrion's bill payment offerings. Bank One handles electronic bill paying through a combination of Checkfree services and in-house capabilities.

Some critics say it is a disappointment that Integrion did not develop an imprint with a system of its own. The Interactive Financial Services platform is largely a product of IBM.

Checkfree Corp., meanwhile, has become Integrion's "preferred provider" for bill payment and presentment-even though Integrion had built its own bill payment engine. Soon afterward it acquired Visa Interactive, presumably as a way to bolster that in-house capability.

"As we went through the evaluation, we decided that in the end, (Checkfree's) Genesys was best," Mr. Fenimore said. "So we're sunsetting Visa Interactive and migrating Integrion bill pay to Checkfree."

That move rankled advocates of bank-owned, or "bank-centric," billing systems. In their view, banks-particularly if they are aligned in a consortium-are perfectly suited to building "switches" that would debit the bank accounts of bill payers and credit the accounts of receiving corporations.

"Why has Integrion not stepped up and taken a leadership role as a utility or central processor that so many people agree needs to exist?" said David Stewart, vice president of Global Concepts Inc., Norcross, Ga. "Integrion seems like an obvious player to take on that role. It's a bank- owned association of sorts and it has processing capabilities."

Ms. Litan said for Integrion, this was "a missed opportunity to control the process.

Given its big-bank domination, "Integrion had the market clout to build its own engine, and tell Checkfree and Transpoint how to fit into it," she said. Transpoint is a bill presentment effort jointly owned by Microsoft Corp., First Data Corp., and Citigroup.

Others have tried to fill the perceived bank-centric void. A new company, Internet Payment Exchange Inc., for example, is expected to announce at the National Automated Clearing House Association's Payments '99 conference next week its formation as an Internet-based switch for routing bill presentments and payments. Its president and chief executive officer is Douglas Braun, the former head of Braun, Simmons & Co., which, ironically, provided the software that is the framework of Integrion's IFS.

"Integrion had a wonderful opportunity to do this but didn't seem to take it," Mr. Braun said. "So here we are."

Mr. Fenimore, noting that presentment is in its early stages, said that "it takes a long time to get all the processes in place" and that Integrion would "play a very active role." He said Checkfree and Transpoint have "done a good job and should be commended." Some of Integrion's newly raised capital would go toward a major development effort to connect its IFS platform with Checkfree's Genesys. Mr. Fenimore expects to be able to demonstrate that capability this spring.

Three banks besides the primary owners-Michigan National, ABN Amro and PNC Bank-also are using IFS. Mellon Bank has done the development work to become a user and is evaluating whether it will do so, Mr. Fenimore said.

The other banks not in the management group, constituting a strategic advisory council along with IBM and Visa, are: Comerica, Citibank, First Union, Fleet, PNC Bank, U.S. Bancorp, and Wells Fargo.

"I feel confident that we'll have eight to nine users by the end of the year," he said. Last week, Integrion achieved one million subscribers, and Mr. Fenimore expects to have 1.5 million by the end of 1999.

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