From...

June 27, 1999
Web posted at: 7:28 p.m. EST (0028 GMT)

by Megan Barnett

(IDG) -- Yet another consortium of financial institutions is entering the race to offer bill presentment and payment to the online world. Chase Manhattan, First Union and Wells Fargo announced this week that they have teamed up with Sun Microsystems to form a new company, temporarily called the Exchange, to provide the infrastructure necessary to connect billers and consumers online.

"We have to solve the chicken or egg problem," says Kelly Scott, Senior VP and Director of E-channels at First Union Bank. Online bill presentment and payment has yet to take off largely because neither billers nor consumers are willing to forge ahead without the other's commitment.

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But with access to the 60 million consumers and 59,000 billers that bank with the three institutions, the Exchange "can quickly get the critical mass necessary to jumpstart this industry," Scott claims.

The market opportunity for online bill presentment and payment is huge. An estimated 70 percent of first-class postage mail in the United States is generated from bills, and each bill costs between 50 cents and $1.50 to process. If consumers paid bills over the Internet, the cost savings to businesses could be enormous.

The Exchange says it offers a solution that has not yet been addressed: the "switching" functionality needed to connect billers with a directory of consumers. A Chase corporate customer, for instance, would automatically have access to all of its consumers who bank at Wells Fargo.

But Georgia-based CheckFree, the leading provider of backend solutions for the bill presentment industry, begs to differ, saying its services also include this "switching" capability. The firm partners with banks, billers and consumer front-end interface providers, acting as the middleware for the electronic bill payment process. CheckFree stock fell nearly 25 percent on the news.

CheckFree acknowledges the competition, but shrugs it off as "yet one more group trying to find a meaningful role" in the online bill payment space, according to Pete Kight, CheckFree's CEO. CheckFree provides some financial services and technology for each of the banks backing the new Exchange, but Kight says his company can effectively serve the banks as customers in one area while competing with them in another.

Some of the other players in this space have yet to bloom fully. Integrion Financial, a consortium of leading banks and Visa and IBM, also offers backend processing in bill presentment and other banking functions for financial institutions. It has yet to establish significant market share. TransPoint, a venture of Microsoft, First Data and Citibank, launched its online bill presentment services in May.

Although bill presentment and payment is a service in which billers, banks and consumers have indicated interest, a definitive way to deliver it has not been introduced. The slow acceptance of online home banking could impede the banks' penetration in this arena. A slew of other nonbanking companies have begun offering solutions as well. Portals such as Yahoo and Netscape are also rolling out online bill presentment services as an alternative front-end interface for consumers.

First Union, Wells Fargo and Chase have a long road ahead. As one CEO of an online financial service company said recently, "The only thing slower to adopt new technology than a bank is a consortium of banks."