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Integrion buys Visa Interactive

The consolidation of two major online banking technology providers unifies the bank-oriented camp but leaves the greater banks vs. software companies conflict unresolved.

Integrion Financial Network today acquired Visa Interactive, consolidating two major technology providers for online banking.

"We at Integrion think this acquisition is very important from a strategic standpoint," said William Fenimore, Integrion's managing director and chief executive. "With the merger, we have been able to give Integrion the capability to deliver an end-to-end bill payment product."

Terms of the deal were not disclosed. The deal will merge Visa Interactive's 200-employee unit with Integrion, which is also developing home banking software for banks.

Integrion, which will function as a service to banks, previously focused on consumer-oriented software and middleware to verify that bill payers had adequate funds in their bank accounts. Visa Interactive's software efforts focus on transfers of funds from the consumer's bank to the biller's bank. Integrion also picks up Visa Interactive's 60 customers in the deal.

However, Visa will continue to operate its ePay service, which actually transfers funds from the payer's bank to the biller's bank. ePay and Integrion will cross-market their services to banks.

Although Integrion's acquisition of Visa Interactive unifies the bank-oriented camp, it does nothing to resolve the continuing conflict between financial institutions and the software companies banks fear are trying to steal their customers.

"At the base of all this is political animosity and tension, making for a silly situation between Integrion and the software companies," said Scott Smith, senior analyst with consulting firm Current Analysis. "The reason Integrion came about was political, to give banks a tool, a say-so in what happened to them because many felt Microsoft and Intuit were encroaching on their space."

But the bank-oriented players, Integrion and Visa (an association owned by banks), remain at odds with Microsoft (MSFT), Intuit (INTU), and CheckFree (CKFR)--which provides bill-paying services to banks in competition with Integrion--over software standards for online banking.

Early this year Intuit, CheckFree, and Microsoft proposed OFX as a standard for how different home banking software interacts with each other, but Integrion's first version will be based on its own Gold Message Standard. Both sides say publicly that the two systems will interoperate, but months of talks have produced no agreement on a single protocol.

"We felt that the Gold Standard represents what the banking industry [wants], since we're owned by banks and should be looking to its standards," said Integrion's Fenimore. "We have had a continual dialog with OFX and developers of OFX in hopes that we can converge Gold and OFX.

"Those continue, and my hope is that sometime in 1998 that will happen," he added. "But it's not a move to OFX, but a blend of OFX and the Gold Standard, a convergence."

Analyst Smith thinks the continued split between the IBM-led banks and the software vendors will confuse individual banks that must choose which software to use.

"The industry is in a very delicate position in terms of growth. Many institutions are just beginning to decide which path to take in terms of middleware," said Smith. "It freezes banks a little bit."

''In a period of time when we're supposedly moving to open specifications and platforms, what we're seeing is a regathering of camps--and not at the best time," he added. "It doesn't make sense [for Integrion] to say you're doing your own platform but moving together in future. They want OFX to come crawling to the banks."