Visa International has struck a deal with Microsoft Corp. to process payments for users of the Microsoft Money personal finance software.

The result of months of negotiations that sparked persistent rumors in the home banking community, the agreement puts Visa in position to take processing business away from Microsoft's rival, Intuit Inc.

The alliance - a reinforcement of already close ties between the biggest bank card and software organizations - has been approved by Visa's U.S., Canadian, and European boards, and it awaits a final nod from the Visa International board next month.

Visa and Microsoft officials said banks working with the Money software will have the option of routing payments through either the bank card infrastructure or Intuit Services Corp., Microsoft's current contractor.

But Microsoft has been keen to develop an alternative since last May when it canceled its merger agreement with Intuit, intensifying the competitive rivalry between Money and Intuit's market-leading Quicken package.

About 19 banks, of a total of 31 that have signed up with Microsoft, are providing on-line banking and bill payment services to personal computer owners using the Money program.

The Microsoft-Visa payment system will be operating by summer, executives of the companies said.

Gary Arlen, president of Arlen Communications in Bethesda, Md., said the deal "one-ups Intuit Services Corp." while giving Microsoft a potential "Trojan horse" for getting closer to hundreds or even thousands of Visa member banks.

"From our standpoint, it's very clear that banks want various options. (This) gives banks another great option," said Richard Bray, a product manager for Microsoft Money. "There won't be any pressure from Microsoft either way."

Nonetheless, Visa and Microsoft both promised a very aggressive pricing and marketing posture vis-a-vis Intuit. Bankers have said it costs several hundred thousand dollars to get started with Intuit Services, and smaller institutions have reportedly found this expense prohibitive.

"Over time, you will see a different service level based on what highway is being ridden," said Fraser Bullock, president of Visa Interactive, the California-based card association's remote banking arm.

The link with Microsoft could also give Visa's home banking strategy a needed boost, though Mr. Bullock denies it has been hurting. He said the unit has signed up 90 banks, including some of the 20 largest in the United States. About 40 institutions have services running on the Visa system.

Meanwhile, Microsoft may use its Visa alliance to make further progress in repairing its frayed image among bankers. Over the last couple of years, the Redmond, Wash., software giant has been accused of everything from arrogance to harboring ambitions of becoming a bank.

Microsoft chairman Bill Gates set out to change that tone at the Bank Administration Institute's retail delivery systems conference in December. He stressed his intention to give banks multiple options for pursuing on- line strategies. He characterized Money as "the consumer file cabinet," saying "it will be based on open standards."

Apart from the consumer payments alliance, Visa and Microsoft spent much of last year co-developing Secure Transaction Technology, a proposed standard for ensuring security of payments on the Internet. But the companies had a falling out with an alternative group that included MasterCard, which did not help the cooperative image that Microsoft was trying to project.

The Visa and MasterCard camps announced Feb. 1 that they had resolved their disagreements and would subscribe to a single protocol, to be called Secure Electronic Transactions.

In the PC payments area, Visa and Microsoft had had "on-and-off discussions before (and) started in earnest last August," Mr. Bray of Microsoft said. Microsoft in 1994 entered into an exclusive contract with Intuit Services - then known as National Payment Clearinghouse Inc. - but that exclusivity ended more than a year ago, Mr. Bray said.

He rated Microsoft's relationship with Intuit Services as "very good, given the circumstances." Service-quality issues - complaints about the bill payment process have surfaced in recent weeks - were "in no way a driving factor behind the deal with Visa," he added.

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