CheckFree, based in Atlanta, has come a long way since then. Goldman Sachs says 40 of the top 50 banks use CheckFree. Indeed, CheckFree handles back-end bill payment and routing for 350 financial institutions, and 1,100 merchants accept CheckFree electronic bill payments. For those that don't, CheckFree simply cuts a paper check and mails it to them. And consumers can pay bills using the CheckFree system at more than 110 Web sites.

Last week, Bank of America, the nation's largest bank, bought 16% of CheckFree's stock. In exchange, CheckFree got the bank's bill-paying assets, giving it access to the 2.1 million online banking customers that Bank of America says it has. However, there are only 3 million online banking households in the United States, according to the American Bankers Association, and CheckFree already served most of them before the deal, according to Jupiter Communications.

Regardless, CheckFree rules the world of online bill paying. It's the back-end linchpin of transactions, acting as the liaison for banks, billers, and consumers. It provides the technology and services that permit consumers to go to a bank Web site, to Intuit's Quicken site or the Microsoft Money financial software site, or even to a site such as Yahoo and pay creditors by electronic check. CheckFree either wires electronic payment to the creditor, if it's one of the 120 billers signed up for direct payment, or cuts a check and mails it to the creditor.

If a company wants to offer online bill-payment services to consumers or business partners, it pretty much comes down to dealing with one company: CheckFree.

"Near term, we don't see any real serious competitors," says Michael Hodes, securities analyst for Goldman Sachs. "CheckFree was there early, the technology actually works, and it's cost-effective."

Telecommunications company GTE started using CheckFree three years ago because it was "the only thing out there," says Wayne Irwin, assistant VP of Web commerce at GTE. "Since then, we've added the new services it comes up with, such as bill consolidation, so customers can get one bill for wireless, home, home office, whatever."

CheckFree's position in the online bill-paying market is similar to Microsoft's power in PC operating systems and desktop applications. Like Microsoft, it faces a host of challenges that could topple it from the mountaintop--including new competitors with different business models.

One of CheckFree's strengths may also turn out to be its greatest weakness. Because CheckFree is not a bank, but it works through banks to settle online payments, it doesn't have direct relationships with consumers and can't link directly to the nation's Automated Clearinghouse (ACH), the organization that clears all banking transactions in this country with all banks and the Federal Reserve.

Some of the new competitors, however, do have bank charters and can link directly into ACH. This means they can roll out new services without waiting for approval from banks, which are notoriously slow when it comes to implementing new services.

Still, CheckFree has a lot in its favor. It was the first to establish household brand-name status, its services work well, and it's constantly improving and evolving the underlying technology. The company is rolling out a platform called Genesis 2000 that will let it scale from the nearly 3 million banking households it now serves to 30 million. No one else can do that.

Genesis includes another significant advance: real-time enrollment. When consumers go to a bank site to sign up for online bill paying, they can be activated immediately instead of being mailed an activation form.

And CheckFree offers more than bill paying. Its institutional services include portfolio-management software used by companies such as Merrill Lynch and Charles Schwab, and back-end credit-card balance transfer services, which let consumers getting new credit cards shift an old card's balance onto the new one instantly.

CheckFree also has a service called MissingMoney.com, which lets people track down and retrieve money owed to them. MissingMoney can find creditors that owe consumers money, send the current information, and return the cash--free of charge.

The company has been expanding through acquisitions. In December, it bought BlueGill Technologies Inc., which specializes in Internet billing. In March, it bought Frontline Technologies, which has interface software known as Downloader that has been used for years to transfer bank custodian data to M-Watch, a performance-reporting and evaluation system.

Wall Street approves of CheckFree's moves. The company's stock rose from $37 to more than $54 on April 27, the day it announced the Bank of America deal. Goldman Sachs rates the company's stock as a market outperformer. CheckFree last month reported revenue of $79.7 million for its third fiscal quarter ended March 31, compared with $63 million for the same quarter a year earlier. However, the company reported a net loss of $3.9 million, or 7 cents per share, compared with earnings of 4 cents per share for the same period in fiscal 1999, adjusted for nonrecurring items.

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