Travelers Express Co. is molding itself into a true contender in the electronic bill payment processing market.

The business currently is dominated by Checkfree Corp., which boasted a 52% market share as of the end of Feb., according to the Online Banking Report, a newsletter based in Seattle.

But Travelers Express, which had a 30% share, has begun adding significant volume through alliances and partnerships that have brought in new sources of transactions.

Historically, the unit of Phoenix-based Viad Corp. has gathered transactions mainly from service centers that it runs on behalf of utilities and other companies that want to offer alternative bill payment services to customers.

But through agreements with companies such as Virtual Financial Services and Digital Insight, Minneapolis-based Travelers Express hopes to add transactions coming from consumers' home phones and personal computers.

"Checkfree has a large lead in the relationships established" with financial institutions, said David Roy, vice president of electronic bill payment for Travelers Express.

However, he added, "we are different in that we are not trying to provide brokerage and ancillary services. We are focused on being the bill payment engine for financial institutions."

The partnership with Virtual Financial Services is Travelers' most recent effort to expand its share.

Virtual Financial, an Indianapolis start-up, has designed World Wide Web sites for 15 credit unions. The sites increasingly feature bill payment services for which Travelers provides processing.

"It is easier to work in the credit union environment because the customer will have one ID number and all account information is tied to that ID," said Virtual Financial founder and chief executive officer David D. Becker, who also founded re:Member Data Services, which provides services for credit unions.

Travelers Express also is the bill-payment provider for Digital Insight, an aggressive Internet-based company supplying home banking and bill payment services to dozens of banks and credit unions.

Aided by the acquisition of two small firms-BuyPay in December 1994 and PayMate in October 1995-bill payments made through Travelers Express now total 100,000 per day, or about 3.1 million per month, said Mr. Roy. (He declined to specify the percentage of bills paid by consumers using their financial institutions' home banking programs.)

By contrast, Checkfree handles about 5.5 million bill payment transactions per month.

Other companies offering electronic bill payment processing include Citicorp, CFI Proservices Inc., Online Resources and Communications Corp., and Visa Interactive.

Though Travelers has a leg up on many of these participants, observers said the company would have a hard time increasing the number of financial institutions with which it does business.

"This is not going to be a business where technology is most important; it is alliances," said Ira J. Morrow, research director for financial services at the Gartner Group, Stamford, Conn.

"This is basically a mass-market business. But if Travelers Express can sign up enough utilities, mortgage service companies, and others who want to be paid automatically," they might stand a chance of preserving and enhancing their role, said Mr. Morrow.

"We're capitalizing on our expertise in payment transaction processing," said Mr. Roy, "to become the preferred bill payment provider for financial institutions, data processors, and software companies."

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