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February 21, 2000

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CheckFree To Acquire Chief Online Billing Rival
Combined company promises new products and services, improved compatibility

By Matthew G. Nelson

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    The two leaders in the online bill- presentment and payment market are joining forces. Market leader CheckFree Corp. said last week it will acquire rival TransPoint LLC for about $1.7 billion in stock. CheckFree will give TransPoint's owners-Microsoft, First Data, and Citibank-17 million shares, or 23% of the company.

    The merger gives CheckFree a dominant position in the emerging bill-presentment and payment market, according to analysts. "If this marketplace were well-defined, the Justice Department would stop this deal from happening," says Avivah Litan, research director for payment systems at Gartner Group. "But because it's too new and there's no revenue, it doesn't qualify under monopoly rules yet. The bill-presentment and payment market is very immature right now; far less than 1% of all consumer bills are viewed on the Internet today."

    Company officials say customers who were tired of dealing with rival and incompatible systems prompted the merger. "You have a lot of billers essentially forcing this issue of interoperability between TransPoint and CheckFree," says Ravi Ganesan, CheckFree's chief technical officer. "When we looked at it, the most logical thing to do was put things together."

    While scores of other companies are trying to carve out a piece of the market, the CheckFree-TransPoint combination will clearly be the leader. However, its dominance may be challenged by Chase Manhattan, First Union, and Wells Fargo, which last year formed Spectrum, a bank exchange for routing electronic bills. The banks have brought Sun Microsystems and Netscape on board to build their infrastructure.

    CheckFree, Microsoft, and First Data intend to develop new products and services. CheckFree has promised to use Microsoft's Windows operating system and SQL Server database software, and First Data's array of electronic payment and reconciliation services.


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