Smaller and lesser-known payment processors are carving a niche in a part of the home banking market that is dominated by Intuit Services Corp. and Checkfree Corp.

But lacking the transaction volumes, comprehensive service offerings, or deep pockets of their larger rivals, do the smaller fry stand a chance?

So far, the signs seem to point to a limited life expectancy. As the business of home banking via telephone and personal computer heats up, observers said, the upstarts may face a choice between being snapped up by bigger players or closing down all together. (See accompanying story.)

"They're just not able to compete on price and quality with the big guys," said David Weisman, an analyst with Forrester Research, Cambridge, Mass.

"Over time, it'll be difficult, it's an economy of scale business," said Mark Johnson, senior vice president at Checkfree.

He added that the trend for smaller competitors to face acquistion or extinction is already apparent.

Intuit Services itself had been a small bill-payment processor, National Payment Clearinghouse Inc., before its acquisition by software leader Intuit Inc. in July 1994 catapulted it to prominence.

Checkfree recently bought Servantis Systems Inc., a bank software company with a strong home-banking orientation which had earlier bought processor Amresco.

Within a year, Travelers Express, a leader in the money order business with almost 300 financial institution customers, acquired two small firms: BuyPay in December 1994, and PayMate in October 1995.

Although both payment processors still operate independently, they have "some synergies" and conceivably redundancies, according to David Roy, director of business development for Travelers Express.

What might companies like these offer banks that are considering interactive options?

"The companies viewed as leaders are going after the end users too," Mr. Roy said, referring to the fact that Intuit, among others, markets financial software to consumers. He said BuyPay and PayMate are in the servicing business, supporting banks.

Princeton Telecom has retained its independence by taking a more specified approach, outsourcing for larger processors as well as banks. The 12-year-old Princeton, N.J., processor, the brainchild of a pair of Princeton University physics professors, focuses on handling electronic disbursements and settlements for companies like Intuit and Checkfree, as well as banks such as BankAmerica Corp. and Wells Fargo & Co.

"There is probably room for a few specialty players," said Gary Arlen, president of Arlen Communications Inc. in Bethesda, Md.

Even Bruce Burchfield, the chief executive of Intuit Services, admitted that smaller players may find a niche providing low-priced services that complement the more broad-based offerings of companies like his own.

"If you take PayMate, they offer a very low-cost banking and bill payment service," he said. "They will always be cheaper than Checkfree or Visa or us."

Mr. Burchfield, a former Chicago banker who helped found the Cash Station and Cirrus automated teller machine systems, said the big and small servicers could work well in tandem, in the same fashion as the national and regional ATM networks.

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