The Exchange will act as hub for member banks so that they can route electronic bills through a single connection, aiming to ensure continuous and secure transactions between banks and their customers.
The Exchange today named Sun Microsystems as its chief technology provider, snubbing Microsoft, whose TransPoint venture includes credit card processor First Data and Citibank, crosstown rival of Chase Manhattan, as investors.
However, the three Exchange partners are not the first banks to go it alone in the online-billing arena. Two months ago giant Bank of America said it would offer electronic billing and payment using its own technology.
Nonetheless, today's deal reinforces fears that portals such as Yahoo and services such as America Online will soon enter business in the next few months. Yahoo has a deal on tap with CheckFree, and AOL may be poised to do the same.
But banks may have little to worry about. In a February survey of 11,000 consumers, Gartner found that by a whopping 8-to-1 margin consumers preferred paying bills at their banks rather than at Internet portals.
"It's the banks' market to lose now," despite possible Year 2000 problems and the fact that they are prone to moving slowly, Litan said. "Can they move fast enough to beat the portals? That's still up for grabs."
If banks can't get their online-billing service up by October, the portal sites could have an eight-month lead over them, she said.
Online billing includes two components: bill payment and bill presentment. CheckFree is the main supplier of online bill-paying, many times offering an outsourced service for banks to let their customers pay online. Bill presentment entails allowing customers to receive bills online rather than through the mail. Online bill payment has been around for a decade or more, but bill presentment has emerged as a growth area in the past two years.
For the next year, the Exchange probably will rely on CheckFree for bill-paying services, mainly because CheckFree allows consumers to pay all of their bills online.
"They need CheckFree now because they don't have anyone else to do the payments," Litan added. However, Litan believes the Exchange will eventually create their own bill-paying systems, reducing dependence on CheckFree.