A week has passed since Visa's boldest move yet in home banking, but the old, nagging questions about that business have not gone away.
In fact, Visa's acquisition of the electronic payment and banking operations of U.S. Order, a pioneering provider of electronic shopping. and information services to the home, layered a whole new set of questions atop those that have dogged believers in the "electronic cottage" since Alvin Toffler turned that phrase in his 1980 book, "The Third Wave."
Most fundamentally: Is this interactive services market viable? And if it is, can it get beyond computer hobbyists, and others who like trying new things, to attract a mass consumer audience?
Then there are questions about when and how banks might come up to speed on the information highway, and whether their credit card associations, or other partners, will steer them right.
And what about the terms that Visa International struck with U.S. Order?
Potential for $100M
The latter's parent, Worldcorp, disclosed it was getting $15 million plus royalties over several years that could surpass $100 million, depending on the success of the new business unit called Visa Interactive.
And there are questions about the structure of the interactive information industry, in which Visa, its competitor MasterCard, and by extension all banks are building a direct stake.
Except for the handful of bank marketers who are at least on the entry ramps of the infobahn, few in the industry may be aware of the shock waves that the U.S. Order sale sent through the interactive services community.
The Herndon, Va., company championed the screen telephone as a route into the home less expensive than the personal computer.
Several banks have also taken the screen-phone road, and have several manufacturers to choose from.
But U.S. Order's 10,000-household penetration is disappointing, according to Gene DeRose, president of Jupiter Communications Co. in New York, which tracks the interactive services market.
Mr. DeRose and other analysts are asking, "Where does U.S. Order go from here?"
Home Shopping Force
With Visa's cash and endorsement, U.S. Order is sure to remain a force in home shopping and other such services, alongside entities like Prodigy, Compuserve, America Online, and the ever-spreading Internet.
"A colossal market for transaction services in the home is developing," Mr. DeRose said.
Beyond that, he and other expert observers are uncertain. Diverse corporate and economic forces are at work, often through partnerships and alliances that Mr. DeRose describes as "multiple strange bedfellows."
Among those playing for keeps are computer and communications powerhouses. like AT&T, Electronic Data Systems, and U S West, transaction-oriented software providers, including Microsoft, Intuit, and Checkfree, and entertainment conglomerates like Time Warner, Tele-Communications Inc., and Blockbuster Entertainment.
Mr. DeRose's lineup also includes MasterCard, Visa, American Express, and "about a half-dozen big banks."
It's all happening faster than the banking industry as a whole, or almost anyone else, seems able to comprehend.
Most of banking's top decision makers, who were unmoved by the initial wave of in-home enthusiasm in the 1980s, still prefer to watch and wait before deciding whether to put real money into anything more radical than automated teller machines and telephone-response systems.
Filling the void are the bankowned credit card associations, as Visa demonstrated with its acquisition announcement of Aug. 3.
Visa is basing its gambit on the notion that banks' relationships with their customers must be protected and fortified against nonbank attackers.
The weapon of choice is U.S. Order's PhonePlus, a new product manufactured to its specifications by Verifone Inc. that includes a card-swipe reader literally to tie the service-providing bank to its customer.
Visa U.S.A. president Carl Pascarella described the U.S. Order phone as the "cornerstone" of Visa Interactive.
'Cost, Quality, Service'
Wesley Tallman, the San Francisco-based association's president of products and information services, said he expects that bankers and their customers will prefer the screen phone over the personal computer and other alternatives because of "cost, quality, and breadth of the service, and "the card-based transaction provides a guarantee that is not available on checks or automated clearing house-based transactions."
At a suggested quantity price of $149, PhonePlus is almost cheap enough to be considered a replacement for conventional phones, especially as consumers learn about its versatility.
But home banking, to this point, has not revolved around credit or debit cards, and Visa will have to prove the worth of PhonePlus' swipe feature.
As any PC user knows, account numbers can be stored once and easily retrieved any time they are needed.
Screen phones have enough memory to work the same way, replacing the swiping action with the push of a key.
Then again, Visa Interactive is being touted as an "open platform," not just for PhonePlus.
"Banks worldwide can come to one place to offer interactive services to customers using any device they choose," said D. Fraser Bullock, the former U.S. Order executive who is president of Visa Interactive.
The pricing is low enough for banks to charge "a few dollars a month" for a screen-phone-based package, and, Mr. Bullock said, "Our technology is the only one that is '90s-based."
Chris Fredrick, senior vice president in charge of MasterCard International's Master Banking program, begs to differ.
He sees Visa playing catch-up, because Master Banking, offering similar functionality and flexibility, is already well beyond the pilot stage, with 50,000 customers of 10 organizations generating 250,000 transactions a month.
Visa seems to be sniping at MasterCard's alliance with Checkfree Corp., the processor of computerized bill payments that plays a key role in Master Banking. Checkfree is one of the nonbank players Visa says is capable of preempting the bank-customer relationship, an accusation Mr. Fredrick strongly denies.
If Visa scores from this face-off, it is in dramatically buying out part of a leading-edge company like U.S. Order. MasterCard's earlier pickup of a back-office processing unit from Chemical Banking Corp. didn't make the same splash.
Alex W. Hart, who as president of MasterCard oversaw Master Banking's launch, sees this as one specialty where MasterCard is ahead of, and more right than, Visa.
"The U.S. Order device will be chosen by some, but MasterCard is not placing bets on any single hardware or software provider," said Mr. Hart, who recently became executive vice chairman of Advanta Corp. in Horsham, Pa.
Still, most people in home banking circles, including Mr. Fredrick, offered Visa congratulations for completing its deal. Their common theme was that it adds momentum, and a sense of legitimacy, to home banking and related interactive services.
Processor Likes It
"I think it's great to see all this happening," said Bruce Burchfield, president of the bill-payment processor National Payment Clearinghouse Inc., despite some philosophical differences with Visa and U.S. Order.
Seeing the PC as a superior business opportunity, Mr. Burchfield formed a home banking alliance last year with Microsoft Corp. This year, his company was acquired by Intuit Inc., maker of the Quicken personal finance software.
Not evident was criticism that Visa's acquisition might be beyond what is appropriate for a bank-owned association, an accusation heard in years past.
In one case, Visa acquired a credit card processing company, and in another, it negotiated a card-acceptance deal directly with a major retailer, rather than waiting for a bank do it.
Matthew Lawlor, president of Online Resources and Communications Corp., a McLean, Va., screen telephone manufacturer, said he is "rooting for Visa. We respect what they are trying to do to kick-start the market."
But he said he hopes Visa's tie-in with U.S. Order does not undermine its historical commitment to open systems and freedom of choice, which Online Resources has actively supported.
Mr. Burchfield, who as a First Chicago Corp. executive in the 1980s had close ties to Visa and later was chief executive of MasterCard's Cirrus ATM network, said in an interView last year, "Sometimes an association has to step up and do something, because otherwise it wouldn't get done."
George C. White, the payment systems consultant and president of White Papers Inc. in Montclair, N.J., questions how much will get done -- at least in the all-electronic mode that Visa and U.S. Order are striving for.
"Visa seems to believe it has such clout that it just has to happen, that big companies will sign on to receive payments electronically," Mr. White said.
But merchants and other volume billers don't just want payments, they want accompanying invoice and account information, and they are exacting in their requirements.
Mr. White said, "I don't see a lot of companies flocking to Master Banking or Interactive Transaction Partners," a banking and bill-paying alliance of Electronic Data Systems.
"Visa does have marketing clout," Mr. White said, "and it does give U.S. Order access to a lot of banks. But Visa is perceived as a high-price organization, and its pricing will have to be low enough to get people to move."
Mr, Pascarella of Visa described its strategy as both proactive and expedient.
"We are looking to the next generation of payment systems, setting a baseline so that it is bank-owned and controlled, gets us out of the paper chase as quickly as possible, and give total flexibility because we not sure where all this is going Mr. Pascarella said.
"If we tried to build it ourselves, by the time it would be built, we'd be behind the curve," he added. "When the technology exists today, it makes sense to form strategic alliances. Institutions that have failed historically often did so because they tried to build walls around themselves. We are trying to be open, not protective."
Partner Is Happy
"Visa seems to be saying, 'We're going to be something other than just a credit card company,' and that's very good news," said William Randle, senior vice president and chief of marketing at Huntington Bancshares in Columbus, Ohio.
Huntington has entered into a home-banking processing alliance with Visa, and Mr. Randle recently wrote a paper supporting reliance on Visa as a "working partnership...to create or acquire the technology to enable member banks to provide secure service directly to their customers."
"I share the concern that Visa may be too focused on the plastic, but we'll see," he said last week. "The customer is going to drive this."
While the Visa-U.S. Order transaction required approval by the senior bankers on Visa's board, no banker was at the press conference in New York, nor was any quoted in the press release.
Crestar Financial Corp., which began a debit-card- and screen-phone-based pilot with Visa and U.S. Order in Washington last February, declined to comment on the bigger issues but said its dealings with both companies have been "uniformly positive...and we don't expect that to change."
Visa and U.S. Order officials indicated that Visa Interactive is more a building block than one-shot deal.
This year, participants will be able to offer basic banking and account-inquiry services through enhanced telephones, personal computers, and standard phones via automated voice response systems.
Next year they plan to add E Pay, the fully electronic, direct-debit bill paying system that would presumably address billers' desires for end-to-end automation.
Longer term -- within five years, said Mr. Tallman -- Visa Interactive will permit cross-border payments, electronic mortgage and other loan applications, credit-line extensions, and investment account management, among other capabilities.
"You have to realize, the U.S. Order purchase is an intentional, strategic step consistent with a lot of other things Visa is doing," said D. Dale Browning, a retired banker and electronic funds transfer pioneer who is now a senior consultant to the card association.
"The services will utilize infrastructures, technology, and expertise in place today to make financial institutions more competitive against nonfinancials."