Two companies in the on-line banking software market announced an agreement Monday to merge.

Intelidata Technologies Corp. and Home Financial Network Inc., which individually had struggled to gain prominence in a crowded field, said they would combine under the name Spherys.

Intelidata's back-end processing and middleware systems for home banking and bill payment would be added to Home Financial Network's front-end Internet banking software.

Spherys aims to market itself as an end-to-end systems source for financial institutions of all sizes, said Daniel M. Schley, chairman and chief executive officer of Westport, Conn.-based Home Financial.

Intelidata's stock, which has traded at extremely low prices in recent months, was unchanged Monday, at $4.0625 a share.

The deal would build upon an already strong relationship between the companies. Intelidata invested $5 million in Home Financial at its founding in 1995, giving it 25% ownership.

The question of merging with Intelidata had always been when, not if, Mr. Schley said. The two have "talked about it for years," he said.

They already share clients like Summit Bancorp of Princeton, N.J., Compass Bancshares of Birmingham, Ala., and BB&T Corp. of Winston-Salem, N.C.

Both vendors have undergone transformations in their relatively short lives.

Home Financial started by selling Home ATM software for personal computers, which was designed to be as simple and intuitive to learn as an automated teller machine.

Last September the privately held company introduced Total Web Banking, which includes Web design, Internet-based transactions, content to help a bank become a portal, and an integrated marketing system.

Virtually all of Home Financial's "approximately 15 clients" plan to adopt Total Web Banking, Mr. Schley said, though the company will continue to support and sell Home ATM to banks that want it.

Intelidata, which is nine years old and formerly known as U.S. Order, sold a telecommunications business last year to work exclusively on banking and bill payment software.

More than 20 financial institutions use its Interpose Transaction Engine or Interpose Payment Warehouse.

The merger may be the start of a consolidation wave in Internet banking software. Growth industries like this one typically "begin with high fragmentation and a lot of players," Mr. Schley said, "but demand inevitably forces consolidation to a few strong players."

William F. Gorog, chairman of Intelidata, said, "With year-2000 efforts about to lift, we see a market really ready to explode." He predicted that next year will be "the biggest" for growth in on-line banking.

"Already in 1999, we are pursuing 22 real client opportunities, compared to one we had at this time last year," Mr. Gorog said.

In the "merger of equals," shareholders of Intelidata would get 63% of Spherys' shares.

"Intelidata is set to take off," said analyst Chet White, senior vice president of the brokerage L.H. Friend, Weinress, Frankson & Presson Inc.

He said he anticipates "innovative products," particularly in electronic billing.

The combined offerings would include Web site design services, transactional banking, bill payment and presentment, portal-level content, real-time legacy integration, and bill payment warehousing.

Eric Jacobsen, Home Financial Network's president and chief operating officer, said Spherys would be open to acquiring complementary products and services.

It would also continue to work with leading processors and technology providers such as International Business Machines Corp., Integrion Financial Network, and Checkfree Corp., he said.

Spherys would have 125 employees in Reston, Va.; Westport; Orem, Utah; and Toledo, Ohio.

The combined client base would include 22 of the top 100 financial institutions.

Spherys would have Mr. Schley as chairman and chief executive officer, Intelidata CEO Alfred S. Dominick as president, Mr. Gorog as chairman of the board's executive committee, Mr. Jacobsen as vice chairman, and Home Financial's chief financial officer, Andrew Bangser, as CFO.

The name Spherys refers to the spherical planet and the company's "potential to connect it," Mr. Schley said.

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