CheckFree Gains Upper Hand Over Banks with Acquisition of TransPoint; High-Tech Company Enhances Position in EBPP Marketplace.

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PALO ALTO, Calif.--(BUSINESS WIRE)--February 23, 2000

CheckFree's recent acquisition of TransPoint will have strongly felt effects on the banking industry and its position in the bill payment industry, according to the research company Killen & Associates.

"This acquisition will have huge ramifications on the banking industry," stated Michael Killen, founder and chairman of the research company. "The banks had hoped to slow the encroachment of high technology companies into the cash management, Internet banking, and payments markets as corporations issue bills and customers pay their bills using the Internet. The combination of TransPoint and CheckFree, as well as CheckFree's new resources from the BlueGill acquisition (announced Dec. 21, 1999) shifts the center of power in EBPP to CheckFree, the new high-tech EBPP juggernaut. The banking industry will have to counter this development."

Killen & Associates' "EBPP Weekly Alert" reports that CheckFree's acquisition of TransPoint combines the resources of two companies in the same e-bill distribution and payment business into one powerful force. This makes it impossible for banks and other players to play the two competitors against each other. CheckFree will buy TransPoint outright and as a result, Microsoft, First Data, and Citibank will own 23 percent of the company. The three investors now have an interest in driving up the value of CheckFree.

"CheckFree processes over 4 billion payments each year. Its goal in the EBPP market is to drive the growth of ACH (Automated Clearinghouse) payment transactions," Killen continued. In 2005, financial services companies, telcos, utilities, and other companies that issue most of the world's bills will need to process 64 billion electronic payment transactions. This will create a $34.4 billion market opportunity that CheckFree, other technology companies, and the banks will pursue.

"When CheckFree announced its plans to purchase BlueGill, it started a process in which CheckFree, a technology company, would gain a significant advantage over all bank-centric EBPP competitive approaches, certainly in the US market, and over other EBPP software and service providers' solutions as well. Using BlueGill's products, CheckFree would be able to offer solutions that start with the extraction of data from the biller legacy data file and end with customer payments. Although the company still lacks a strong offering and capability in the area of customer resource management (CRM), one-to-one marketing, and systems integration service, its EBPP solution encompasses more functional areas than that of any of its competitors. Since CheckFree can now 'get in' at the beginning of an EBPP implementation, it also will be in a strong position to sell customers a full range of CheckFree products and services."

The need to counter CheckFree's new capabilities came at a bad time for TransPoint, according to the research company. At that time, the TransPoint team had little to show for its efforts, and a new bank-centric approach -- Spectrum, which provides an alternative approach to the distribution of bills -- was gaining momentum. "In more than two years, TransPoint was only able to sign up 20 billers -- six of the large billers, like GTE and MCI Worldcom, were also customers of CheckFree. On the other hand, CheckFree had signed up 50 billers. During this time, none of their EBPP customers were generating meaningful revenue -- they were basically just rolling out their EBPP service. Regardless of the growth of the EBPP market, it was clear that TransPoint had little to show for the effort."

Furthermore, TransPoint's bank-centric competitor is Spectrum, founded by Chase (CMB), First Union (FTU), and Wells Fargo (WFC) in October 1999. Spectrum's mission is to provide the banks a means to consolidate bills. This is an alternative -- competitive -- approach to not just TransPoint, but CheckFree as well. Eleven banks have now signed up to utilize Spectrum's services. Derivion, an application service provider, has also positioned itself to help banks offer a service-based EBPP solution to their customers.

Regarding CheckFree and the future of EBPP, Killen stated, "The balance of power in the EBPP banking space has clearly shifted to CheckFree. With the addition of BlueGill's and TransPoint's resources, the company is well positioned to meet the competitive threat of bank-centric approaches such as Spectrum. Key companies in the banking and high-tech sectors are busy trying to determine how they should react to the new CheckFree. Spectrum, especially, may have difficulty responding because the company still has not found a chief operating officer. On the other hand, CheckFree and Spectrum could become the new Visa and MasterCard of EBPP, assuming no other group emerges to challenge them.

It will not be easy for CheckFree to unite the disheartened TransPoint team as well as the BlueGill team, whose thinking is primarily rooted in legacy files. Furthermore, CheckFree will encounter difficulty retaining the customers of BlueGill because it competes with those customers.

According to the "EBPP Weekly Alert," other companies need to re-examine their roles in the EBPP and payments markets. These include Total Systems, EDS, American Express, Discover, NPC, Integrion, S.W.I.F.T., Equifax, NDC, and most large banks. Future issues of the "EBPP Weekly Alert" will speculate on the future roles and possible partnering of these companies.

On February 25, Killen & Associates will publish an analysis of the new CheckFree. It will be available to subscribers of the Killen & Associates EBPP/ESP Supplier Profile service.

The EBPP Weekly Alert is standard reading throughout the industry for everyone who needs to keep abreast of the latest EBPP developments. The free newsletter is part of the company's industry-leading EBPP/ESP Intelligence Subscription Service, which provides supplier profiles, in-depth market analyses, EBPP adoption rates, and business cases in the most important vertical markets.

For a free subscription to the newsletter and additional information on the company's products and services, visit Killen & Associates' website, http://www.killen.com or contact Jules Street, [e-mail], tel. [phone], fax [phone].

Killen & Associates, Inc., a global provider of business intelligence to the service industries, is the only research company that provides a continuous EBPP/ESP business intelligence subscription service that gives a global perspective across all major industry sectors.

EBPP/ESP decision-makers worldwide tune in to Killen & Associates' Webcasts at www.killen.com/tv to discover how other enterprises are seizing the opportunities created by the advances of EBPP and ESP. Decision-makers worldwide read the company's EBPP Weekly Alert. Subscribers to the company's EBPP/ESP Supplier Profiles have called this service the best of its kind. The company's most recent study is "Multichannel E-Business: Competitive Advantage for 21st-Century Global Enterprises."

Killen & Associates, Inc. has offices in Palo Alto, Zurich, and London.