Internet banking software companies are at a crossroads.

The slew of companies that have rushed into this market are chasing a shrinking number of banks. This puts pressure on the vendors to bulk up through mergers or raise capital through initial public offerings, which are seen as alternative routes to whatever longevity is possible in the fast-moving Internet banking business.

As many companies are lined up to do IPOs as have struck merger or acquisition deals over the past month.

In April, nFront Inc. joined the IPO parade with a Securities and Exchange Commission filing. Also in the pipeline are Online Resources and Communications, Princeton Ecom Corp. (formerly Princeton Telecom), and E- Loan Corp.

"If you are not in the (IPO) race and have taken a go-it-alone strategy, you'll be left in the dust," said Gary Craft, director of research at E- Offering Inc., a unit of E-Trade Group.

The flow of IPO funds may just be beginning. As many as 10 organizations in the burgeoning electronic banking field may file for IPOs in the next three months, predicted Bill Burnham, senior research analyst at Credit Suisse First Boston in San Francisco.

The IPOs come amid a rash of mergers among prominent suppliers of Internet banking technology. The resulting consolidation has created a sense of urgency among the independents to get into position for the longer haul.

Last week's acquisition announcement by Security First Technologies Corp.-paying a total of $1.4 billion for the American software house Edify Corp. and FICS Group of Belgium-was only the biggest of four Internet banking software deals over a month's time.

The mid-April merger of Intelidata Technologies Corp. and Home Financial Network, forming Spherys, was followed by Home Account Network's acquisition of First Data Corp.'s direct banking unit on May 5. CFI Proservices bought Meca Software two weeks later, the same day as the Security First deal.

Mr. Craft said a dozen providers of retail and corporate Internet banking software are confronting decisions about whether to merge or go it alone, among them Corrilian Corp., Q-Up Systems Inc., and Digital Insight.

An IPO can help a company convince leery customers that it can survive in a consolidating market, Mr. Craft said.

Online Resources of McLean, Va., a close nFront competitor mainly for smaller and midsize financial institutions, is seeking $46 million in its offering. Online's telephone and Internet-based services are piggybacked on the automated teller machine infrastructure.

Princeton Ecom of New Jersey is also hoping to raise $46 million. It provides electronic bill payment and presentment processing to billers, but is trying cultivate relationships with banks and other processors such as Checkfree Holdings Corp. and Transpoint, the joint venture of First Data Corp., Microsoft Corp., and Citigroup.

E-Loan of Dublin, Calif., is seeking $55.2 million. The company is an Internet portal, letting potential borrowers search for credit products from among 70 participating lenders, including GE Capital Mortgage and Bank United Corp.

Norcross, Ga.-based nFront, which provides on-line banking software and outsourcing services to 83 banks, hopes to raise $49 million. The proceeds would fund sales, marketing, and technology research efforts. The capital also could help nFront attract and retain talent, a problem plaguing all technology companies.

Targeting banks with less than $10 billion of assets, nFront said its "universe" is 10,000 banks and thrifts, excluding the largest 81. Its largest customer is $13 billion-asset Bank United of Houston.

Mr. Burnham said this market is "pretty much wide open. There is still a lot of opportunity there."

nFront's revenues during the first nine months of fiscal 1999, which ends June 30, were $2.8 million, up 250% from a year earlier. It lost $1.8 million, compared to net income of $9,107. The three-year-old company has about 70 employees, up from 20 at this time last year.

Mr. Burnham said the market "is a little tired" of all the IPO activity. "It is tough to get incredibly excited about the next IPO when there are 20 more after that."

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