YAHOO and CHECKFREE DEAL
Yahoo pays the bills
By Owen Thomas
Red Herring Online
January 29, 1999
Want to get your bills online? If you Yahoo, you may be
able to do so sooner than expected.
Yahoo (YHOO) and CheckFree (CKFR) have
launched internal sites for a joint online bill payment
venture.
Earlier this week, CheckFree
announced it would spend $6
million on an Internet distribution
contract, including $2 million in
capital expenses.
"A deal with CheckFree and
Yahoo was pretty clear to us,"
says Gary Craft, a digital
commerce analyst at investment
bank BancBoston Robertson
Stephens.
DRESS REHEARSAL
Friday morning, a Yahoo site at bills.yahoo.com offered
to enroll users in a bill payment service.
"Bill Pay Enrollment: This is where we describe the
service, and say all sorts of neat stuff," text on the page
read. An invitation to sign users up was linked to a Web
server located behind a firewall on a network controlled
by CheckFree.
The Yahoo site was pulled down at approximately 11
a.m. Pacific time and replaced by a stock feature.
Yahoo spokespeople would not comment on the
company's plans for online bill payment or offer reasons
why the site was changed.
Yahoo has been making several moves to beef up its
personal finance information. It was one of the first
Internet portals to offer a cobranded Visa card; more
recently, it quietly launched an electronic tax filing
service.
"We haven't formally announced [the tax site] yet," said
a Yahoo spokesperson. "You want to let people bang
on it first."
If the company had similar plans to test the bill-payment
feature, it apparently quickly changed its mind. One
reason may be the tight lid Yahoo and CheckFree have
attempted to keep on the announcement. Despite
reports earlier in the week by the Atlanta
Journal-Constitution and the Wall Street Journal,
both companies have refused to comment.
"The contract that we have signed has specific
confidentiality clauses," says CheckFree spokesperson
Terrie O'Hanlon. Ms. O'Hanlon would not say whether
the unplanned disclosure of Yahoo's site constituted a
breach of that contract.
BUCKING THE BANKS
A reason why the bill-paying partners may be treading
so cautiously is the radical shift this represents in
CheckFree's strategy. Previously, CheckFree had been
counting on deals with major banks to bring consumers
to its bill-payment services, according to Mr. Craft.
"They were making a big bet with the banks," says Mr.
Craft. "But the banks have been very slow to move.
Now, [CheckFree] is in a position where they can be
almost indifferent as to where the consumer enrolls."
Mr. Craft said that CheckFree would likely see
revenues from the deal by charging billing wholesalers
and large utilities, who would pay a fee for each
customer presented with an online bill.
"What's important are the branding issues: It's simply
Yahoo Bill Pay, with no bank involvement," says Marc
Johnson, an analyst at Jupiter Communications in New
York. "In consumers' minds, the opportunity for bill
presentment and aggregation resides with banks, but it's
their market to lose."
Mr. Johnson's research indicates most consumers plan
to seek online banking services through traditional
banks, with a small percentage looking to portals. But,
he adds, bold moves by Yahoo and others could shift
consumer behavior: "Consumer favor will rapidly shift to
whoever has a better offering."
The banks haven't been entirely silent in the bill-paying
market. While many are still committed to proprietary
home-banking interfaces, others have been moving to
Web banking. Excite (XCIT) recently signed a deal with
Bank One to market credit cards and online banking to
Excite's audience, and Citibank struck a deal with
Transpoint, a joint venture of Microsoft (MSFT) and
First Data Corporation (FDC).
@Home Network (ATHM), which recently announced
it would buy Excite, had also struck a deal with Bank of
America (BAC) to provide online banking over its
high-speed cable modem service.
Other likely players are America Online, which has a
commanding lead in Internet subscribers, and Intuit
(INTU), which owns the dominant Quicken personal
finance software. Microsoft also offers a competing
personal finance package, and has finance features on its
MSN portal.
While bill payment has long been available, bill
presentment -- letting consumers receive bills
electronically as opposed to by paper in the mail -- has
been hailed as the killer app of online banking.
"In bill presentment, it's a one-to-one relationship," says
Mr. Craft. "CheckFree, Intuit, and AOL are all targeting
[billing outsourcers like] Princeton Telecom. Now, the
horse-race is on."
Yahoo just expanded by buying GeoCities.
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