The Postal Service says it hopes to win a share of the online person-to-person payment market by combining its traditional package delivery service with a verification and escrow system it has developed with CheckFree Corp.

The new joint offering, called Pay@Delivery, lets people pay for merchandise electronically when goods are delivered through the mail. For example, customers can buy merchandise at an online auction and release the money only when the merchandise arrives.

With Pay@Delivery, the sender mails goods through Priority Mail, and the receiver initiates payment online. The funds are taken out of the customer's account immediately, but they are not moved into the sender's account until the goods are delivered.

When the delivery confirmation bar code is scanned by the mail carrier (or the recipient confirms delivery at the Postal Service's Web site), the money is automatically released to the seller as an electronic payment.

The Postal Service is sidestepping a potential rivalry with banks, as institutions running CheckFree's proprietary online banking software will be able to offer Pay@Delivery from their own Web sites. This is a different approach from when the Postal Service introduced eBillPay, a move that irked some banks, which felt the Postal Service was wrongly competing with them in bill payment.

"For CheckFree, this is about extending its processing capabilities so that more payments move through its pretty extensive network in which banks are the customers," said James Van Dyke, a senior analyst at Jupiter Media Metrix in New York. "The Postal Service is scrambling for ways to protect its market share because people are sending e-mail rather than old-fashioned letters, and they are using alternative shipping providers."

Online auctions are a potentially lucrative market, as the dollar value of goods bought at online auctions is expected to reach $7.2 billion this year and $12.3 billion by 2005, according to a Jupiter study.

"The main purpose for us is to create a connection between payments and mailing packages," said Stephen M. Kearney, the Postal Service's senior vice president of corporate and business development. "The Postal Service is using new technology to create better connections between things we've always done - providing third-party security and validation and also delivering packages and moving people's money."

Pay@Delivery - which went live at the Postal Service's site on Aug. 28 and was announced Tuesday - is one of three enhancements to eBillPay, which CheckFree also built and that went live last April. The other enhancements are an electronic payment service modeled on domestic postal money orders for transactions between individuals, and an electronic postmark that can be added to payments when they are created, sent, changed, or canceled.

The basic Pay@Delivery service costs the sender $1 per transaction. Consumers also can sign up for two types of subscription plans - $6.95 per month for 20 payments, and 50 cents for each additional transaction; or $1.50 per month, plus 65 cents for each transaction.

Some observers say the Postal Service is overstepping its bounds by getting involved with e-commerce at all.

"We don't see any reason for a governmental agency to become involved in this," said Jason Mahler, vice president and general counsel for the Computer and Communications Industry Association, a Washington trade group representing Internet companies. "This is something the private sector is developing and has developed. This is clearly not a postal service. If the Postal Service were not to be involved, there would be any number of companies, like banks and credit unions, that can offer the service."

By throwing its support behind CheckFree, the Postal Service is giving the Norcross, Ga., company a potential leg up on its bank-supported competitors in the market for person-to-person systems for online auctions, such as c2it, which Citigroup Inc. launched last year; Billpoint Inc., the eBay-owned venture in which Wells Fargo & Co. bought a 35% stake last March; and PayPal Inc., in which J.P. Morgan Chase & Co. and Providian Financial Corp. have invested.

The linkage between delivery and payments could set Pay@Delivery apart from other services.

"It creates more of a level playing field between the buyer and seller," Mr. Kearney said. "Right now at auction sites people often don't know each other, so they create safety requirements - like waiting for a certified check before sending goods."

"The thing that the [other P2P players] can't touch is the link between the shipping and payment processing network," Mr. Van Dyke said. "But PayPal already has the critical mass. They are a very aggressive and nimble marketing organization. Is that something the Postal Service can become?"

Lynn Busing, the executive vice president of account management at CheckFree, said the service will also drive bank customers that want to offer the service to CheckFree.

"It helps the bank keep the checking account centered at the life of the consumer so they don't have to fund a separate account to make an auction purchase," he said. "They can keep their own checking account and feel secure about it because it will be paid out only at delivery."

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