Industry observers said the alliance announced last week between Visa International and Microsoft Corp. will afford banks greater flexibility and control in their PC banking efforts.

Under terms of the alliance, Microsoft agreed to add Visa as a processing option for home banking transactions that emanate from Microsoft's personal finance software, known as Money. Previously, all Microsoft Money transactions flowed through Intuit Services Corp. of Downers Grove, Ill.

Intuit Services also acts as the processor for home banking transactions coming from Quicken personal finance software, which has a much larger user base than Money.

For bankers willing to play one processor off another, the alliance could translate into better pricing and service quality, observers said.

"The creation of the Visa option puts more pressure on (Intuit Services Corp.) to be more flexible than it might have been," said Richard Comandich, a senior vice president with U.S. Bancorp, Portland, Ore., which was one of the earliest PC banking partners with both Microsoft and Intuit Inc.

Mr. Comandich and others offering PC-based banking said they had no major complaints with the level of service from Intuit's processing unit.

But they welcome the leverage that the Visa-Microsoft alliance affords them.

"I will consider switching any time I can give my customers cheaper, better service," said Gene Galloway, an executive vice president at Sanwa Bank California, Los Angeles, a unit of Sanwa Bank Ltd.

Charles Bretz, a spokesman for Compass Bancshares, Birmingham, Ala., another Microsoft and Intuit partner, said, "Microsoft and Visa have committed to bringing competitive pricing for PC banking, and this will lower the banks' costs, which also should lower costs for the consumer."

Observers said Visa may be able to give bankers better home banking processing deals by bundling these services with more traditional card processing services.

Phoebe Simpson, an analyst with New York-based Jupiter Communications Co., said that offers like this could put Microsoft in "a position to completely leapfrog over Intuit Services Corp."

"We could see a major battle for banks' affections, and they do not have a software loyalty," she said.

"This is going to give Intuit a run for its money."

One upshot of the rising competitive pressure could be improved service quality.

Stephen Hirsch, a vice president for Chase Manhattan Corp., said his bank and its on-line customers hope that electronic bill payment services become more automated.

Compass Bancshares' Mr. Bretz said that he sees Visa as "committed to radically and quickly improving the electronic bill payment system. This improvement will help the adoption and acceptance of bill payment."

Sheryl Ross, a spokeswoman for Intuit Inc., the Mountain View, Calif.- based parent of Intuit Services, said that this "probably will drop pricing. We don't know to where."

She added that Intuit had begun beefing up its operations before the Visa-Microsoft alliance was announced. The company hired 47 new customer service representatives for on-line banking, and persistent system problems in accessing American Express - another partner - have been rectified, she said.

Although Visa is likely to offer stiff competition, analysts said it is still too early to count Intuit out. "Intuit's presence is so overwhelming from a consumer standpoint. I don't think this is driving Intuit into a corner from which they cannot escape," said Chris Le Tocq, an analyst for Dataquest in San Jose, Calif.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.