Visa International said Wednesday that it has acquired the home banking and bill-paying operations of U.S. Order, a fouryear-old company that has had a significant impact on the early development of interactive electronic services.

The U.S. Order assets and activities form the nucleus of a new business unit, named Visa Interactive, that the card group hopes will give it a competitive edge as home banking and related businesses shake out.

Visa officials hailed their acquisition in almost revolutionary terms. and industry observers said it is a sign that the young, rapidly evolving on-line services market is gaining legitimacy.

What's to Follow

At the same time, the Visa - U.S. Order transaction only seemed to raise the level of anticipation for what might come next.

It is the latest in a series of acquisitions, joint ventures. and strategic alliances that cause realignments and reassessments of online business opportunities almost by the day.

Visa did not disclose what it had paid for the U.S. Order assets.

Wesley C. Tallman, president of Visa products and information systems, said at a press conference that the companies will share in a royalty arrangement based on the ultimate success of Visa Interactive.

U.S. Order is controlled by a holding company, WorldCorp, and Knight-Ridder Inc., the newspaper and electronic publisher, has a minority share.

D. Fraser Bullock, 38, president of U.S. Order and an employee of the Herndon, Va., company since its start in 1990, was named president and chief operating officer of Visa Interactive, reporting to Mr. Tallman.

Scores of Employees Moving

Coming with Mr. Bullock to Visa are about 55 U.S. Order employees, just over half of that company's total.

What remains at U.S. Order, under chairman William F. Gorog and new president John C. Backus, are home shopping and other information-based programs, a support unit serving Visa Interactive and member banks, and hardware offerings led by the ScanFone and PhonePlus screenenhanced telephones.

The ScanFone, the older of the products, has 10,000 users -- a large number by current standards, but well short of the mass penetration that home banking purveyors are reaching for.

Mr. Backus said the key to mass distribution is a lower cost. PhonePlus will be available soon to Visa members at a promotional unit price of $149, which is already several hundred dollars below that of previous generations of equipment, and which banks or other marketers may be willing to subsidize.

$150 Still Too High?

U.S. Order people said the breakthrough price, still a year or more away, is about $100. The public may then consider the ScanFone, which has a reader for credit and debit cards, as a replacement for a traditional touch-tone model.

While Visa is buying into the screen phone as a logical step toward home banking, it is not precluding other devices, such as the personal computer. Nor does the U.S. Order deal affect other Visa alliances, such as one with Intuit Inc. that links home banking to the Quicken personal finance software.

Visa and U.S. Order had been in discussions for more than two years, and earlier this year entered a working alliance that included a home banking trial with Crestar Bank in the Washington area.

Keeping Relationships

Carl Pascarella, president of Visa U.S.A., said the association is most concerned about keeping members' options open and supporting their choices, while assuring that a bank's relationship with its depositor is not compromised. The U.S. Order deal assures "no ambiguity as to who has the primary relationship with the customer," he said.

Citing conversations with member bankers, Mr. Pascarella said they fear that nonbank participants such as telephone companies, Microsoft, Visa's home banking partner Intuit, or MasterCard's partner Checkfree Corp.

Seen as a Coup

Competitors and other market participants congratulated Visa for filling out its home banking offering in one stroke.

Chris Fredrick, senior vice president in charge of MasterCard's Master Banking program, said Visa is on a more equal footing. Master Banking has 18 committed and 10 live participants with 50,000 accounts generating $50,000 transactions a month.

"This can only be a positive for our industry -- it encourages growth," said Bruce Burchfield, chairman of National Payment Clearinghouse Inc., a payment processor and advocate of PC based services that was recently acquired by Intuit.

Matthew Lawlor, president of Online Resources and Communications Corp., a screen-phone competitor of U.S. Order, agreed that the deal has symbolic importance. He said he hoped that Visa's close tie to U.S. Order does not undermine its commitment to open systems and standards, which Online Resources has strongly supported.

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