Microsoft and bill-payment processor plan to form a home banking network.

Chicago - With an assist from Microsoft Corp., a midwestern bill-payment processor is staking an early claim to the emerging home banking market.

National Payment Clearinghouse Inc., a Schaumburg, Ill., company run by former banker and MasterCard executive Bruce A. Burchfield, said it is forming a "strategic alliance" to usher banks and their customers into computerized home banking.

Microsoft, the dominant force in personal-computer software and a growing factor in consumer information services, would provide the technical link to participants in what Mr. Burchfield calls the Home Banking Network.

The banking connection would be an important new component of Money, Microsoft's personal finance software, which is going Lip against Intuit Inc.'s market-leading Quicken.

First Chicago Signs On

Mr. Burchfield also said he is lining up "leading banks" to provide home services through his network, but the only one to go public is First National Bank of Chicago.

A First Chicago senior vice president, Glenn G. Larson, joined Mr. Burchfield in a discussion of the alliance at the Home-based Financial Services Conference, held in Chicago last week by the Bank Administration institute.

Both Microsoft and National Payment Clearinghouse are giving only sketchy details of their program, pending a more formal announcement when Microsoft releases the banking software.

Richard Bray, product manager in Redmond, Wash.-based Microsoft's home products unit, said more details are likely to come out at the Bank Administration Institute's Retail Delivery Systems Conference in November.

But as word of the alliance begins to spread, it is adding an element of competition - and perhaps confusion - to a business that many bankers are just trying to make sense of.

New Wealth of Choices

While publishing, entertainment, telecommunications, and computer industry powerhouses build "information highways" into the home, bankers suddenly find their options, and choices of potential partners, burgeoning.

Aside from the Home Banking Network, the two credit card associations are constructing their own routes to member banks' customers' homes.

MasterCard International has built a service called Master-Banking around the PC-based bill-paying system of Checkfree Corp., Columbus, Ohio. Visa U.S.A. has allied with Intuit and its popular Quicken software for a home banking package that is still in the formative stages.

Meanwhile, regional automated teller machine networks like MAC and Most were represented at the home-based services conference, exploring how they might play a role in processing the payment volume likely to flow from home banking devices.

Hedging Their Bets

And institutions getting a head start in the business, such as Meridian Bancorp of Reading, Pa., and Barnett Banks Inc. of Jacksonville, Fla., tend not to be putting all their eggs in one delivery-system basket.

They are hooking up with the Prodigy network, which connects more than a million personal-computer households, and they are experimenting with interactive television and screen-telephone technologies.

Mr. Burchfield, chief executive officer of National Payment Clearinghouse, conceded that he may be contributing to the complexity. But he views it, along with the alliance approach, as a fact of life in a radically changed business environment.

"To date, everything [banks have done in home banking] has been proprietary, but now they will be riding on public media, he said. "Not only will it not be proprietary to any one bank - it will allow the small guys to play, not just the big guys."

Leadership Seen Needed

Since a single bank will not be able to go it alone - a conviction that industry leaders and experts share with Mr. Burchfield - "there needs to be some leadership here," he said.

He can assert that leadership with Microsoft's help, he said, because of that company's proficiency with PC software and ability to integrate "complementary services" like investment products and financial management into the package.

"Home banking, standing alone, will not be the answer," Mr. Burchfield said. "The most logical positioning for home banking is as a better way to manage money."

Mr. Larson of First Chicago, which uses National Payment Clearinghouse to process phone-initiated bill payments, praised the Microsoft connection.

"Microsoft is a household word, and has established what a good computer interface looks like," he said. After several earlier false starts in computerized home banking, First Chicago has concluded that "partnering is the best way to offer home banking at a reasonable cost.

"You have to find the right mix of partners and the right product mix," Mr. Larson said.

Wait-and-See Attitude

Those who heard the Home Banking Network presentation, including an official from Intuit, adopted a wait-and-see attitude, because it is still what Mr. Burchfield characterized as "a concept discussion."

Neil Waldo, a Visa U.S.A. senior vice president. said the alliance is not yet a competitor with his association's program, and will not necessarily be one.

Visa and Home Banking Network, as well as MasterCard, present themselves as "utilities," letting banks play the primary consumer-marketing role

Since all the systems envision themselves as "open," meaning they will accommodate many software, hardware, and product choices, they might end up feeding transactions to one another.

But in a speech to the BAI conference, Visa vice president William Powar took a swipe at Home Banking Network, saying Microsoft's Money program cannot match Quicken's 70% share of the PC market.

Similarly, MasterCard went with Checkfree because that bill-paying system is established, embedded in numerous basic software packages and used by about two million households.

Diversifying Giant

For its part, Microsoft is diversifying fast from its business-computing base into personal information services, entertainment products such as games, and interactive television. Mr. Burchfield pointed out that he struck a deal with Microsoft before Visa aligned with Intuit. He believes Microsoft, already considerably larger than the manufacturer of Quicken, will dominate personal computing.

"Intuit is a very well-run, entrepreneurial company and a founder of this [personal money management] market, and I'm not saying it will get blown out," Mr. Burchfield said. "Either Intuit or Microsoft can be seen as a good choice.

"I am just banking on the idea that this is a case of the early market leader meeting the 800-pound gorilla." He said Microsoft's announcement this week of a home computing strategy, of which the Money software is a key element, is a step toward long-term dominance. Most PCs already have Microsoft's Windows operating system.

Mr. Burchfield said National Payment Clearinghouse would link home banking customers to their banks in much the way automated teller machine networks operate.

He comes by that model honestly, having served as the first president of Cirrus System Inc. and chief of debit products for Cirrus' parent, MasterCard International. before moving to the bill-payment processor in 1988.

Mr. Burchfield also worked at First Chicago, where he oversaw the introduction of telephone bill paying in 1978.

"The home banking environment is very much like ATMs in the early 1980s," he said. "Every bank started with its own brand identity, but that kind of product differentiation, in the end, didn't provide much differentiation.

Race for the Home PC Market

"In this case, the market will be driven by software, and the banks have to see themselves as participants" in the race to serve the 27 million computer-using households, 10 million of which have a modem that allows for interactive services.

Citing market studies, Mr. Burchfield said some four million personal computers are being bought for home use each year.

PC owners fit the upscale. "early adapter" profile that bankers should find attractive. Half have college or advanced degrees, half have annual incomes above $50,000, and 64% are 45 or younger.

"PC users are easy to find and interested in a lot of services," Mr. Burchfield said. "Just at tracting the 4% [of households] that buy on-line services today would put us well on our way."

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