Kight says he "doesn't see access to the ACH network as a competitive differentiator--it's simply a commodity debit and credit process that happens as a result of all the other work necessary to send, receive, schedule, pay, post, track, and support a billing and payment transaction."

Kight also dismisses competitors such as X.com that claim their direct connection to the ACH gives them an edge. "There have been many new entrants to electronic billing and payment over the past two years," argues Kight. "As companies learn more about the complexity beyond the connections--what we call the 'messyware' of connecting to banks, billers, and portals and providing customer care to consumers and IT departments--the experience aspect of our value proposition becomes extremely compelling."

But X.com isn't just an ACH connection. It offers a host of financial services. The ACH simply gives it an additional edge over CheckFree. Besides, X.com isn't the only company with advantages. American Express, Merrill Lynch, MasterCard, and Visa have direct relationships with millions of consumers and could create bill-paying and bill-presentment services.

Gartner's Litan says bill-payment companies that win consumers will succeed, and the best way to get consumers is to interface with them directly. The speed with which X.com's PayPal signed up consumers is telling, he says. When consumers sign up with PayPal, they don't have to do business with a bank that is on some list. They just put in whatever bank information they have; X.com routes the electronic payment to the ACH, which settles with the bank, regardless of whether that bank has online banking services.

Analysts say the online bill-paying landscape will change quickly. And with Visa, MasterCard, and American Express not yet in the game, it's hard to predict CheckFree's future, or anyone else's for that matter.

Litan, for one, gives CheckFree two more years before new competitors pose a tough challenge.

For competitors to succeed, however, they need to provide everything CheckFree does, plus a direct connection to the ACH for easy bill presentment, a direct user interface, and the ability to scale to tens of millions of customers. No one has that combination yet.

Some in the industry privately predict that Visa has the greatest potential to transform the online bill paying marketplace. Visa already has an infrastructure that scales to 30 million or more, and Visa invented the electronic funds transfer network that most banks use to hook to the ACH.

The only part of the puzzle left is getting the consumers. Visa could accomplish that by offering a bill-paying site or system that lets consumers see all their monthly statements for telephone, gas, electric, insurance, etc., and then pay for those services along with their monthly credit-card bills. Since Visa is an association of banks, most of which are CheckFree customers, such a move would pose a problem for CheckFree and any other company that wants to compete in the online bill-paying market.

If Visa does come out with a competitive system, CheckFree could lose business quickly, Litan says, adding that CheckFree would have a hard time competing with Visa because it doesn't have its own user interface.

"No comment on Visa" was the initial response of Bank of America's Argosh. "We clearly believe the CheckFreeÐBank of America alliance is formidable and can match alternatives in terms of efficiency," he adds. "Others aspiring [to this market] will find that it's more complex than meets the eye."

But when reminded of the bank's own alliance with Visa, he admits: "We're not ruling out working with Visa."

It remains unclear, however, just where the new competition will come from and how strong a threat it will pose for CheckFree.

"We get solicited all the time by banks and other companies who are promising bill-paying and bill-presentment services like CheckFree," says GTE's Irwin. "We will use multiple services if we need to--whatever allows us to deliver the services we want to our customers. There will be competitors. All we care about is using XML-based services so we remain standardized. Otherwise, who cares how many companies we use?"

For companies that want to let customers pay bills online, adopting standards is a key move--especially the Extensible Markup Language standard, Irwin says. "And make sure whatever company offers the bill payment also offers good bill presentment," he says.

As for CheckFree, Irwin jokes that Kight should buy a scanning company so CheckFree can put bills online more quickly. That may not be high on Kight's list of priorities, however. Integrating acquisitions and fending off new competitors will keep him busy for a while--at least until the market enters a new phase of competition.

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