Same story, different spin:
visa, checkfree team up to challenge msfdc electronic
payment venture
May 21, 1998
American Banker via NewsEdge Corporation : Visa
U.S.A. Inc. and Checkfree Corp. announced plans
Wednesday to form a joint venture to process electronic
bill payments.
The companies said they intend to combine existing
assets and activities to create a "bill payment and
remittance infrastructure for the nation's financial
institutions and billers."
The strategy puts the unnamed new company in
contention with MSFDC, a joint venture of Microsoft
Corp. and First Data Corp., in the emerging, high-stakes
business of delivering bills and handling the remittances
over electronic networks.
Peter J. Kight, chairman and chief executive officer of
Atlanta-based Checkfree, touted its approach as "a
huge win for America's financial institutions, billers, and
ultimately consumers."
"This open infrastructure is designed to support
transactions from any electronic billing sources,
including other electronic bill presentment services
companies" such as MSFDC, Mr. Kight said.
MSFDC officials were not available to comment, but it is
clear that battle lines are being drawn. Both ventures will
have to play the role of neutral utilities while also selling
their respective services on the basis of price and
technological capabilities.
MSFDC and Checkfree have been sparring for months,
and now Checkfree will have a powerful new ally.
The joint venture will combine the San Francisco-based
card association's ePay system with Checkfree's
extensive biller data base. The companies estimated that
together they can deliver payments and related
information electronically to as many as 85% of payees.
That high percentage will be important in getting the
cost advantages of " end to end" electronic service.
Although millions of people initiate payments by phone
or computer, many ultimately have to be converted to
paper checks.
The structure of the new company is still to be
determined, but Mr. Kight said he expects Visa and
Checkfree will share equally in the revenue generated by
transaction traffic.
If the ownership is fifty-fifty, it will be much like Vital
Processing Services LLC, a company Visa U.S.A. formed
in 1996 with Total System Services Inc. to keep banks'
hands in the credit card merchant-processing business.
Visa's participation in Vital reclaimed for its owner-banks
a stake in a business that had drifted away to
transaction-processing specialists, the largest of them
the very same First Data Corp. that hooked up with
Microsoft in MSFDC.
The deal with Checkfree will result in "a superb payment
infrastructure that supports our member financial
institutions' home banking and remittance-
concentration services and the needs of their
customers," said Visa executive vice president William
E. Stewart.
He said the joint venture "enables Visa to combine its
core strengths in the electronic payments realm with the
resources of the leading electronic bill payments
processor."
Mr. Stewart, a deputy of Visa U.S.A. president Carl
Pascarella, was previously instrumental in the creation
of Vital and in Visa's becoming part of the Integrion
home banking consortium.
Integrion Financial Network-which consists of Visa,
International Business Machines Corp., and 17 banking
companies-is relying on Checkfree for bill presentment
and payment technology and played a role in bringing it
and Visa together.
Integrion chief executive officer William M. Fenimore
called Visa and Checkfree "a powerful alliance that will
bring tremendous benefit to Integrion banks."
Mr. Kight said, "Until now Checkfree and Visa were on
competing paths. " Instead of encouraging merchants
and their banks to establish electronic connections to
Checkfree, Visa was selling them on its competing
service, ePay.
"Just because Visa is Visa doesn't mean that banks
shouldn't do business with us," Mr. Kight said.
For its part, Checkfree decided that sending all its
electronic payments through ePay was preferable to
trying to duplicate the investment that Visa had made in
its direct-debit and settlement system.
"Once we sat around the table with Integrion, we no
longer thought like competitors," said Mr. Kight.
They are contemplating a system in which financial
institutions or Integrion would pass home banking
customers' information through to Checkfree or another
bill payment provider. With its connections to
merchants, Checkfree would make the payment and ePay
would be the "switch accepting the request from a
consumer's financial institution and routing it to the
biller's financial institution," Mr. Stewart said.
Visa's ePay plus Checkfree's biller relationships "give
Integrion and Checkfree the best end-to-end solution,"
said Gary Meshell of Benton International, a consulting
subsidiary of Perot Systems, Dallas. He sees " the
beginnings of a Canadian-type payments system, where
six big banks work as a clearing-house utility."
"Getting Visa, Integrion, and Checkfree to work together
is a good thing if it can increase the percentage of bill
payments that go electronically, " said John Backus,
president of Intelidata Technologies Corp., Herndon, Va.
Richard K. Crone, vice president of Cybercash Inc.,
Redwood City, Calif., said the new venture is too
retail-centric. "They haven't involved the wholesale side
of the bank, which should have something to say about
what they do to empower their customers." Copyright c
1998 American Banker, Inc. All Rights Reserved.
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