Intuit Inc.s now-complete retreat from the electronic bill payment business is the end of an era.
Intuit riled banks in the mid-90s with its brazen purchase of National Payment Clearinghouse Inc., a bill processor in Downers Grove, Ill. In the then-budding business of electronic billing, the move was seen as a clear threat to banks, which had their own hopes of creating a business around the processing of consumer bill payments.
Seven years later the Intuit threat is hardly one. The Mountain View, Calif., company announced last week that it will sell off the last remnants of its electronic billing business to Princeton eCom, a private company that for years has played second fiddle to CheckFree Corp., the dominant provider.
The deal helps shut the door a little further on an episode in which banks have felt belittled by powerful technology companies with designs of generating fees by entering businesses generally thought to be bank territory.
Even Microsoft Corp.s shadow has diminished. The software behemoth backed off from electronic bill payment and presentment last February when it sold its Transpoint EBPP joint venture with First Data Corp. and Citigroup. This February it beat a retreat from mortgage lending by announcing its intentions to sell HomeAdvisor Technologies Inc., a joint venture with Freddie Mac and four bank-owned mortgage companies.
But memories are long among the bankers who were buzzing about the potential of electronic bill payment years ago.
When Intuit got into the bill-pay service, boy, did it create an uproar in the industry, said Cathy Corby, chief executive officer of her own firm who at the time of the Intuit purchase was director of electronic banking at BarnettBanks of Jacksonville Fla. Suddenly Intuit, which had been working with banks, went head-to-head as a competitor for bill payment products directly to consumers. This did not sit well with the banks.
Glenn Johnson, Ms. Corbys partner and president of Corby & Co. Inc., also of Jacksonville, was the online director of self-service banking at Bank of Boston at the time. There was a lot of consternation within banks, because a lot of them did perceive Intuit becoming direct competitors of certain products, he said.
Bruce A. Burchfield, the now-retired founder of National Payment Clearinghouse, remembers the Intuit purchase as a wakeup call.
Electronic bill payment was at that time under the radar screen of any bank, he said. The banking industry makes sure no one comes along and usurps its position. The industry saw this as a way technology could impact their business in a negative way.
Banks went so far as to convince the Justice Department to squash a proposed purchase of Intuit by Microsoft in 1995, Mr. Burchfield said.
The landscape looks much different now.
From Intuits perspective, things started changing in September 1996 when it sold the NPCI processing business it had just acquired two years before to CheckFree. CheckFree, of Atlanta, then began processing bill payments for users of Intuits Quicken home banking software.
We didnt want to be in the back-end payments business anymore, said Raymond Stern, senior vice president of corporate development and strategy for Intuit. But we wanted to continue to provide bill payment services to our customers through Quicken, outsourced through CheckFree.
Intuit then set about creating front-end software consumers could use to manage their online banking and bill payment tasks. This product, Quicken Bill Manager, is the piece that Intuit now is selling to Princeton eCom for reasons that are similar to the sale of its back-end processing business.
Rather than build it all ourselves, Mr. Stern said, we are better suited to find a partner who we think is better capable of doing that than we are. We believe very strongly that EBPP represents an important revolution for our customers and billers, and we will continue to make that an offering to consumers, but we are not going to invest in the deep functionality that is necessary to succeed in that business.
Intuit will continue to focus on areas where we can build long-term advantages and leverage the things were good at, Mr. Stern said. What were good at is building relationships with customers and building brand.
Intuit will receive either cash or an equity stake in Princeton eCom equivalent to about 20% of the companys outstanding shares. Intuits stock closed at $32.17 Friday, down 4% from the week before.
Under the deal, Princeton eCom will process transactions generated through Quicken Bill Manager and Intuit will share in the revenue generated. Intuit, meanwhile, still has a processing relationship with CheckFree stemming from the National Payment Clearinghouse sale.
Observers say that Intuits new loyalty to Princeton eCom could cost CheckFree some business. CheckFree, with its leading share of the electronic billing market, may be the current enemy No. 1 of banks lusting for e-billing fee revenue. Certainly, the Intuit arrangement is a big boost for Princeton eCom, which now has a direct link to consumers.
Tension between CheckFree and Intuit may have prompted Intuits partnership with Princeton eCom, said James Van Dyke, a senior analyst at Jupiter Media Metrix. Its not like these companies are bosom buddies, he said. My bet is that wherever possible, the processing business goes to Princeton eCom, because Intuit now owns part of it.
Mr. Stern said that technology and economic concerns were the reasons Intuit chose to work with Princeton eCom.