Intuit Inc. and Microsoft Corp., archrivals for the business of home banking providers and their customers, have renewed their friendship in a back-office aspect of the business.

Even as their competition in personal finance software heats up, Microsoft agreed to allow an Intuit subsidiary to continue processing banking transactions and bill payments emanating from Microsoft's Money software.

The companies described the contract Tuesday as an "expanded multiyear agreement," building on one that dates back to the Intuit unit's early involvement in developing a Money-based banking service.

The deal underscores how quickly the sands can shift in the on-line services market, blurring the distinctions between companies that may compete in one area and cooperate in another.

Microsoft, playing catch-up to Intuit's best-selling Quicken software, has been aggressively promoting what it terms an open, flexible approach to banking relationships.

Intuit has responded with BankNow, a personal computer service soon to be released on America Online, and by allowing connections through bank data processing organizations.

The rivals had a common interest in transaction processing. Intuit Services Co. - National Payment Clearinghouse before Intuit acquired it in 1994 - was the first and for a time the only back-office utility for both Money- and Quicken-based banking services.

The Intuit-Microsoft relationship was renewed at a time when banks have other processing alternatives, including a joint venture of Microsoft and Visa. But the deal apparently ensures Intuit services can continue as the "one-stop shop" that it says many banks want.

"This is exactly what we were established to do," said Tom Daniel, president of the Downers Grove, Ill.-based subsidiary of Intuit. "We allow banks to have a single point of contact and to provide multiple front ends into our system, whether it is America Online or Microsoft Money, Quicken or future products.

"To financial institutions, this sends a message that Intuit Services will be a viable player for a long time to come."

"This keeps Intuit in the game," said Gary Arlen, a Bethesda, Md.-based telecommunications industry expert. "A lot of people were writing them off last year."

"It reflects well on endorsement of their processing service," said Phoebe Simpson of Jupiter Communications in New York.

Intuit Services had recently been plagued by complaints of poor service, and the analysts said it faces further challenges.

With on-line banking still in the formative stages, "there are very few processors that have the possibility of making money," said David Renard, an analyst with Gartner Group in Stamford, Conn. Despite Intuit's market lead, it "will need quite a bit more volume" to make money.

Because they have freedom of choice and might be swayed by Microsoft's marketing power, banks and their customers could tilt in favor of Money. If Quicken's market share erodes, financial institutions might be less tied to its processing service.

But there is no sign of erosion. Researchers put Quicken at about 80% of the financial management market, or nine million "active users," as Intuit calls them. Microsoft's Money is around 15%, or two million. Meca Software Inc., owned by several banks, ranks third, with 600,000.

To some bankers' dismay, Intuit had required banks working with Quicken to use its service, though in June it struck deals to allow connections via bank-owned data processors Electronic Payment Services and M&I Data Services.

Microsoft, meanwhile, has been preaching openness and winning favor from some bankers newly wary of Intuit. Microsoft renounced playing the intermediary role that some bankers had feared and promulgated an "open financial connectivity" standard for any bank processor to work with Money.

"For the last year, Microsoft has been interested in partnering with the people that the institutions turn to," said Matthew Cone, product manager in the Redmond, Wash., company's home banking unit.

"We are not in the business of being a service provider, so we work with Intuit Services Corp., Visa Interactive, Checkfree, and other similar companies," said Mr. Cone. "We want to ensure that whatever platform an institution chooses, Money is an available option."

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