Visa U.S.A. Inc. and Checkfree Corp. announced plans Wednesday to form a joint venture to process electronic bill payments.

The companies said they intend to combine existing assets and activities to create a "bill payment and remittance infrastructure for the nation's financial institutions and billers."

The strategy puts the unnamed new company in contention with MSFDC, a joint venture of Microsoft Corp. and First Data Corp., in the emerging, high-stakes business of delivering bills and handling the remittances over electronic networks.

Peter J. Kight, chairman and chief executive officer of Atlanta-based Checkfree, touted its approach as "a huge win for America's financial institutions, billers, and ultimately consumers."

"This open infrastructure is designed to support transactions from any electronic billing sources, including other electronic bill presentment services companies" such as MSFDC, Mr. Kight said.

MSFDC officials were not available to comment, but it is clear that battle lines are being drawn. Both ventures will have to play the role of neutral utilities while also selling their respective services on the basis of price and technological capabilities.

MSFDC and Checkfree have been sparring for months, and now Checkfree will have a powerful new ally.

The joint venture will combine the San Francisco-based card association's ePay system with Checkfree's extensive biller data base. The companies estimated that together they can deliver payments and related information electronically to as many as 85% of payees.

That high percentage will be important in getting the cost advantages of "end to end" electronic service. Although millions of people initiate payments by phone or computer, many ultimately have to be converted to paper checks.

The structure of the new company is still to be determined, but Mr. Kight said he expects Visa and Checkfree will share equally in the revenue generated by transaction traffic.

If the ownership is fifty-fifty, it will be much like Vital Processing Services LLC, a company Visa U.S.A. formed in 1996 with Total System Services Inc. to keep banks' hands in the credit card merchant-processing business.

Visa's participation in Vital reclaimed for its owner-banks a stake in a business that had drifted away to transaction-processing specialists, the largest of them the very same First Data Corp. that hooked up with Microsoft in MSFDC.

The deal with Checkfree will result in "a superb payment infrastructure that supports our member financial institutions' home banking and remittance-concentration services and the needs of their customers," said Visa executive vice president William E. Stewart.

He said the joint venture "enables Visa to combine its core strengths in the electronic payments realm with the resources of the leading electronic bill payments processor."

Mr. Stewart, a deputy of Visa U.S.A. president Carl Pascarella, was previously instrumental in the creation of Vital and in Visa's becoming part of the Integrion home banking consortium.

Integrion Financial Network-which consists of Visa, International Business Machines Corp., and 17 banking companies-is relying on Checkfree for bill presentment and payment technology and played a role in bringing it and Visa together.

Integrion chief executive officer William M. Fenimore called Visa and Checkfree "a powerful alliance that will bring tremendous benefit to Integrion banks."

Mr. Kight said, "Until now Checkfree and Visa were on competing paths." Instead of encouraging merchants and their banks to establish electronic connections to Checkfree, Visa was selling them on its competing service, ePay.

"Just because Visa is Visa doesn't mean that banks shouldn't do business with us," Mr. Kight said.

For its part, Checkfree decided that sending all its electronic payments through ePay was preferable to trying to duplicate the investment that Visa had made in its direct-debit and settlement system.

"Once we sat around the table with Integrion, we no longer thought like competitors," said Mr. Kight.

They are contemplating a system in which financial institutions or Integrion would pass home banking customers' information through to Checkfree or another bill payment provider. With its connections to merchants, Checkfree would make the payment and ePay would be the "switch accepting the request from a consumer's financial institution and routing it to the biller's financial institution," Mr. Stewart said.

Visa's ePay plus Checkfree's biller relationships "give Integrion and Checkfree the best end-to-end solution," said Gary Meshell of Benton International, a consulting subsidiary of Perot Systems, Dallas. He sees "the beginnings of a Canadian-type payments system, where six big banks work as a clearing-house utility."

"Getting Visa, Integrion, and Checkfree to work together is a good thing if it can increase the percentage of bill payments that go electronically," said John Backus, president of Intelidata Technologies Corp., Herndon, Va.

Richard K. Crone, vice president of Cybercash Inc., Redwood City, Calif., said the new venture is too retail-centric. "They haven't involved the wholesale side of the bank, which should have something to say about what they do to empower their customers."

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