A study predicts that in the next few years Microsoft Corp. will penetrate more deeply into banks' financial transaction businesses than most in the banking industry expect.

The study, by the Killen & Associates consulting firm, is aimed at outlining the extent to which the software giant will expand its role in the nascent business of electronic commerce.

Killen's findings, to be published later this month, provide perhaps the boldest and, for bankers, most alarming forecast for Microsoft's impact on the electronic financial services market.

The study projects that by the year 2000, Microsoft will be earning upwards of $2 billion in annual revenues from its electronic funds services alone.

Based on the software company's multifaceted foray into the electronic commerce business, Killen & Associates asserts that within the next five years "Microsoft's preeminent position in personal computer software, emerging on-line services, and other strategic resources will enable it to muscle into the top 15 electronic funds service suppliers to capture substantial business now controlled almost exclusively by banks and financial service providers."

"Don't be surprised when you see business taken away from major banks like Citibank, Mellon, and Bank of America, and third-party" suppliers like Equifax and Deluxe, said Michael Killen, president of Killen & Associates.

"Microsoft's focus and threat in the international financial services community is clear: Banks and other EFS providers must aggressively leverage corporate strengths and adopt new electronic business approaches or they will lose EFS market share and control of markets and profits."

The study, titled "Microsoft's Global Electronic Financial Services Strategy: Impact and Opportunity," predicates its judgment on several recent moves Microsoft has made in the funds services arena. The most notable of these is its pending acquisition of Intuit Inc., maker of the market-leading Quicken personal finance software.

Other key Microsoft initiatives to which the study points include the creation of a Microsoft Network annex on the Internet, a partnership with Visa International to provide for secure computer-based payment services, the development of an on-line shopping service, and a handful of other Internet application and multimedia development projects.

According to Matt Cone, a product manager for Microsoft, these "pieces aren't pulled together." He added that any estimate on the company's potential revenues in electronic fund services was "very speculative."

But based on its efforts to date, the software Goliath has more than a fighting chance to become as big in electronic commerce as any of the nation's top 20 financial institutions, according to David Young, a consultant who worked on the Killen study.

Without the acquisition of Intuit, however, Mr. Young said he would cut in half the study's $2 billion revenue estimate for Microsoft.

"It would slow them up by at least 50%," he said, adding that Microsoft would still hold an estimable position in the market.

"I was surprised at how fearful many of the big banks are about what Microsoft has put together," Mr. Young said. "I don't think any large bank executives are fooled into believing Microsoft will do anything but compete with them."

But, in fact, four large banking companies - U.S. Bancorp, First Chicago Corp., Michigan National Corp., and Chase Manhattan Corp. - have already partnered with Microsoft to provide their customers with home banking services.

Since pairing up with Microsoft more than a year ago, U.S. Bank has signed on 3,800 banking customers. And that experience "does not support Microsoft competing for our customers," according to Linda Parker, a vice president at U.S. Bank. Ms. Parker pointed to a "learning curve" for banks in electronic commerce, and said teaming up with technologically savvy partners was the best way - perhaps the only way - to make headway in this rapidly burgeoning marketplace.

But many bankers remain skeptical.

"I think it's sad that the banking industry is not taking this more seriously," said William M. Randle, senior vice president for marketing and strategic planning at Huntington Bancshares.

"What strikes me as completely inappropriate is that the industry has no strategy."

Microsoft is not the only player banks must watch out for. Both Mr. Young and Mr. Randle pointed out that other large nonbank companies - such as AT&T, First Data Corp., First Financial Management Corp., and a handful of telecommunications and cable firms - could pose a mighty threat as well.

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