With nearly 9,000 U.S. banks not yet wired to the Internet, the market for Internet banking software is heating up.

Competition is particularly strong in the community bank, thrift, and credit union markets, as thousands of institutions wrestle with the question of which software and data processing providers to use.

These institutions have a healthy interest in Web banking. More than two-thirds of the 227 transactional Web sites counted in June by the Federal Deposit Insurance Corp. were developed by banks and thrifts with assets of less than $500 million.

Vendors focused on this market are beginning to boost their sales numbers, leaving more established companies like Security First Technologies and Edify Corp. to garner higher-profile contracts.

Among the more successful entrants-by number of financial institution commitments-are Digital Insight of Camarillo, Calif.; Jack Henry & Associates of Monett, Mo.; nFront Inc. of Athens, Ga.; and FundsXpress Inc. and Q-Up Systems, both of Austin, Tex.

Nearly two-thirds of Digital Insight's 155 transactional Web site customers are credit unions, reflecting founder Paul D. Fiore's roots as chief financial officer at AT&T Employees Federal Credit Union in New Jersey. So impressive is the company's lead in this market that a March study by Washington-based Callahan & Associates found Digital Insight's share of the credit union market more than twice that of its nearest rival.

Jack Henry entered the Web banking market with its acquisition last summer of Conductor, a financial services supersite developed by the Block Financial division of H&R Block. Jack Henry renamed the service NetTeller and revamped it into a service for institutions using its core processing software. Of its 100 contracts, 70 were signed this year.

nFront officials promote a product suite that includes nHome Internet banking software and nTouch, a reporting product designed to help banks cross-sell. The software has let clients like First National Bank of Commerce in Georgia sell 2.6 products per customer from its Internet branch.

nFront has signed up 57 institutions since beginning in 1996. Recently, it became the preferred Internet banking provider for data processor Bisys Inc.

FundsXpress, originally a developer of systems integration tools for Austin neighbor Dell Computer Corp. and others, has signed contracts to build transactional Web sites for 50 financial institutions on a service bureau basis. The company boasts a security system licensed from the Massachusetts Institute of Technology.

It runs on the Unix operating system, unlike the Microsoft NT system used by some rivals. "For core banking services, it borders on negligence for a bank to use an application that relies on NT," said John A. Burns, chief executive officer of FundsXpress, formerly known as Mesa Internet Systems.

It also has exclusive endorsements from the Shazam automated teller machine network, the Independent Bankers Association of Texas, and the Community Bankers Association of Illinois.

Q-Up Systems, founded in 1996, now has 45 banks signed up for its systems. The company reported 350% revenue growth for the past year.

But all this activity does not mean that new entrants will have it easy. "If you don't have 20 or 30 banks under the belt, you might as well not even stick you finger in," said Dan Martin, president of Q-Up. "You've missed the game."

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