Yahoo pays the bills
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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
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
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