Microsoft Signs M&I Unit as Alternative Payment Processor

the latest version of Money, Microsoft Corp.'s personal financial management software.

An agreement between the two companies, announced last week, highlights the slowly growing competition in electronic bill payment, a field that Checkfree Holdings Corp. has long dominated. Checkfree had been Microsoft's only third-party payment processor for Money users.

"Checkfree has really been the only game in town in electronic payments" said David C. Stewart, vice president of Global Concepts Inc., a Norcross, Ga.-based research firm. "Whether M&I poses a serious and immediate threat to Checkfree is still unclear, however."

Milwaukee-based M&I Data Services, a unit of Marshall & Ilsley Corp. processes only 500,000 electronic payments a month, against Checkfree's 12 million. M&I has direct electronic connections with 1,100 billers, Checkfree with 2,600.

But M&I, which got into the business in January by acquiring Travelers Moneyline Express, a unit of St. Louis Park, Minn.-based Travelers Express, is steadily increasing its presence.

M&I provides "pay-anyone" processing for about 900 financial institutions. Pay-anyone services enable users to send payments to recipients, regardless of their ability to accept them electronically. Recently, M&I won the business of WingspanBank.com, the high-profile Internet-only bank launched this year by Bank One Corp.

Avivah Litan, research director at GartnerGroup of Stamford Conn., said M&I can sometimes take longer to process electronic payments than Checkfree.

"M&I is not as well developed, but they're trying to come up from the rear," she said. "They pose a sizable threat to Checkfree."

Nancy Langer, senior vice president and general manager of M&I's bill payment services, touted her company's robust customer service for bill payment, which is a feature of the Microsoft/M&I agreement.

"We want to make sure a customer's first experience with electronic bill payment is a positive one," she said.

Users of Money 2000 who choose not to pay bills electronically through their financial institutions will be given the choice of using either M&I or Checkfree. To help them decide, the software features Internet links to promotional information from the two payment processors.

Still not on the list of choices is a bill payment service from Transpoint, the electronic bill presentment venture owned by Microsoft, First Data Corp., and Citigroup Inc. Though Transpoint presents bills for various corporations, it lacks the pay-anyone capability offered by Checkfree and M&I.

Citigroup joined the Transpoint venture last September, agreeing to "provide Transpoint with access to the pay-anyone capability that Citibank developed as part of its Direct Access PC Banking," according to a press release.

Some market participants speculate that Microsoft added M&I as a Money processor with an eye to eventually have Transpoint use M&I's pay-anyone capability, Ms. Litan said.

Ms. Langer acknowledged that M&I has had a long-standing relationship with Microsoft, but she said talk of an acquisition was "speculation at best."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER