WITH INTUIT ACQUISITION, CHECKFREE WILL SERVICE ONE MILLION CheckFree Corporation announced an agreement to acquire Intuit Services Corporation (ISC) for 12.6 million shares of common stock in CheckFree Corporation. Intuit Services Corporation is a wholly owned subsidiary of Intuit Inc. Based on the September 13 closing price of 18 1/16 for CheckFree stock, the indicated price CheckFree is paying for ISC is $227 million. After completion of the acquisition, CheckFree will provide home banking and bill payme nt services to over 180 financial institutions. The acquisition will bring CheckFree's base of home banking and bill payment users to over one million. CheckFree Corporation markets its electronic commerce processing capabilities exclusively to financial institutions, which, in turn, use them to provide home banking and bill payment services to their customers. CheckFree's approach is behind the scenes: providing banking and bill payment transaction processing. -- PR Newswire, 9/16/96 French Bank Note Printer Buying U.S. Card Maker By VALERIE BLOCK Francois-Charles Oberthur Group of France, the third-largest bank note printer in the world, has agreed to purchase Kirk Plastic Co., the second- largest card manufacturer in the United States. The deal, announced last week, follows the sale of other North American plastic card producers to European companies over the last two years. Gemplus bought a U.S. manufacturing base from DataCard Corp., and competitor Schlumberger acquired Malco Plastics. Giesecke & Devrient of Germany bought Security Card Systems of Canada, and De La Rue of Great Britain bought McCorquodale. Los Angeles-based Kirk Plastic had announced a joint venture with Orga Card Systems Inc., a German smart card company, in July 1995, but those negotiations were terminated several months ago. Kirk R. Hyde, president of Kirk Plastic, a 77-year-old family-owned business, said Oberthur made a better partner. Mr. Hyde, 53, will sign a three-year employment contract with Oberthur, also a family business, which is 70%-owned by Jean-Pierre Savare. Kirk Plastic will keep its name and 2,500 employees. Mr. Hyde said he'd had reservations about selling his company, but "if we don't make the deal, we could be out of business in five years if smart cards take over." He said his competitors were purchased by large European concerns driven by smart cards and technological changes. "I could no longer keep up with investments to remain competitive," he added. The new owner will infuse capital and technology, and add distribution channels. Mr. Hyde would not disclose specific terms of the deal, which is scheduled to close within 30 days. Industry observers see the European invasion as concrete evidence that smart cards are gaining ground in the United States. "It's another indication that many companies are betting millions that the U.S. market will develop very quickly," said Dan Cunningham, senior vice president of business development at Phoenix Planning and Evaluation Ltd., a Rockville, Md.-based consulting firm. Mr. Cunningham headed Gemplus' U.S. subsidiary before it acquired the DataCard manufacturing facilities. In Atlanta, Visa is testing Visa Cash, the stored-value smart card system launched in conjunction with the Olympic Games. By early next year, Visa will join with MasterCard, Citibank, and Chase Manhattan Bank in a potentially crucial "interoperability" test on Manhattan's Upper West Side. In other signs of U.S. progress in the smart card industry: Wells Fargo and Co. and AT&T Universal Card Services became owners of Mondex International, the company formed by National Westminster Group of London; several universities are implementing smart card systems on campuses in conjunction with banks; and U S West rolled out card-reading phones in several western states. Even so, smart cards are not producing income here. Mr. Cunningham said acquisitions of profitable companies like Kirk can generate funding for early smart card development. Kirk Plastic, with annual revenues of more than $25 million, said it will produce 125 million magnetic stripe cards this year. Oberthur, an international producer of lottery tickets and plastic cards in addition to bank notes, participates in a joint venture, CP8 Oberthur, which is one-third owned by Bull Group of France, another top smart card producer with U.S. facilities. CP8 Oberthur produces 50 million smart cards annually in two French factories, supplying nearly 70% of French bank cards. Oberthur's U.S. subsidiary, Banknote Corporation of America, is the second-largest security printer in the United States. ComputerWorld: August 26, 1996 Opening Soon: Microsoft National Bank If Bill Gates can persuade the Justice Department to go easy on Microsoft's monopoly in PC operating systems, just imagine how easily he could persuade regulatory agencies to grant him a bank charter. Give up a few tons of documents, hold several meetings that consist of silly bureaucratic bantering and voila! he's got an $ 18 billion de novo bank with millions of online "branches" overnight. And not a trowel of mortar needed. Why speculate about the notion of a Microsoft bank? Because Gates is an impatient man. He doesn't believe bankers are moving fast enough to make home banking a success. The entrepreneurial instinct of such a highly successful person suggests that if conventional approaches don't work, he will bypass them and take over. Gates is a helluva marketer and promoter; he could sell the concept with pizzazz. There's also a bit more to this proposition than meets the eye. A recent phone call from Microsoft's lead person in the home-banking fray revealed some interesting insights. First, the only reason this well-informed and well-connected gentleman called me is that he knows how I feel about home banking it's a solution searching for a problem. I think he's trying to swing me (and at least one other highly visible skeptic) over to his camp. Second, the executive said, home banking has to be sold aggressively by banks. He figures consumers aren't likely to rush in and sign up. He's absolutely correct about the absence of a rush. The part about having to sell online banking aggressively to consumers worries me. If that's the case, then home banking is a cat that has already used up eight lives in the past 25 years. Every major bank has tried home banking and has failed. If the last chance depends on the typical banker's sales skills, then home banking is dead for sure. Consumers are smarter than ever. Give them good reasons to switch, and they don't have to be pushed. Home banking doesn't yet provide compelling reasons. Today's consumers are in love with the checkbook. They aren't complaining about checks. (Banks, of course, hate checks because they're expensive to process.) Consumers don't want to expose their spending habits on the Internet,either. They just aren't ready to say, "I think I'll jump on the Internet today and pay my bills." The promoters of home banking point to surveys that show the increasing penetration of PCs in U.S. households. But that doesn't mean those PCs will be used for online banking. If a poll said 80% of U.S. homeowners have a back yard, does it mean they all want to plant tomatoes? Even banking's technocrats don't do online banking when they go home. If compelling reasons to bank from home are missing, then the next best chance for success will depend on a cultural shift. Maybe the future yuppies, who are now in grade school, will embrace home banking just because it fits in to their electronic lifestyles. The "Gomwatms" grumpy old men with all the money will eventually fade out of the picture. Home banking is a sure thing, once we find its right decade. By M. Arthur Gillis; Gillis is president of Computer Based Solutions, Inc., a banking technology consultancy in Dallas. His Internet address is artgillis@aol.com Financial Times:Thursday, August 29, 1996 Online Shopping Plan Claims Better Security Uunet Pipex on the Internet not only met widespread concerns about security but was more secure than buying by phone or in a shop with a credit or debit card. The company, the UK subsidiary of MFS, the US telecoms operator bought earlier this week by WorldCom of the US and one of the largest European Internet service providers, believes its system is in advance of US developments. The British system is backed by National Westminster Bank, which will act as the clearing house for online debits and credit card transactions. Uunet Pipex said the system, called "The Bureau", will enable customers to buy goods from electronic "shops" on the Internet in safety and with security. Merchants trading on the Internet will be able to take advantage of an established payments mechanism without the cost of building their own. Shopping over the Internet has been possible for some time but its popularity has been held back by concerns over security. Potential customers are reluctant to trust the Net with their credit card information. Nevertheless, online electronic commerce is believed to be worth $300m ({GBP193m) annually at present and rising. Among the organisations seeking to develop secure shopping and payments systems are card companies Visa, Mastercard and American Express and software developers Microsoft, Netscape Communications and Verifone. Internet merchants sign up with Uunet Pipex and pay 5 per cent of the purchase value per transaction. The system is activated when a customer presses the "buy" key and enters his or her credit information. It is then stored securely by Uunet who instructs NatWest to pay the merchant for the purchase. When the deal is complete electronic confirmations are generated for customer and merchant. Mr Richard Nuttall, Uunet Pipex director of electronic commerce, said: "Until now, security concerns have deterred buyers and sellers from doing business over the Net. We have created a comparatively low cost system that is more secure than buying goods on an ordinary credit or debit card." Four merchants have already signed up to use the system. Responsibility for establishing an electronic shop on the Net remains with the merchant. Many believe the quality of the images of goods for sale is a more effective deterrent to Internet commerce than fears over payment security. The principle advantage of "The Bureau" over competitive systems seems to be the ease and low cost of adoption. Mr Susen Sarkar of the London technology consultancy, Ovum, said: "The launch of The Bureau will remove anxieties for both merchants and consumers." Other UK groups, notably Barclays Bank, already offer Internet shopping services and British Telecommunications is testing a large-scale online shopping service. American Banker: Thursday, August 29, 1996 On-Line Banks Unsure About What Kind of Web to Weave JENNIFER KINGSON BLOOM Most banks want to do more with their Web sites, but aren't exactly sure what, according to a survey of banks that have presences on the Internet. Netmarquee Online Services Inc., a Needham, Mass., company that offers on-line information for family businesses, conducted the survey this month. Of 150 banks in the survey, 65% wanted to enhance their content so that people would visit the Web sites more often. "A good number of these banks put Web sites up nine months or a year ago, and they're saying, 'Now what?'," said David Gumpert, president of Netmarquee. "They're coming to realize that they need to do something more than an electronic brochure, to provide some kind of value added to their prospects and customers besides just saying, 'Aren't we great?'" Mr. Gumpert's survey, conducted by telephone, found that traffic ranged from 100 to 500 visits a month. Only 5% of banks surveyed said they were actively promoting or advertising their Web sites. The survey also found that the larger the bank, the more interested it was in using the Internet for business purposes. Banks now are devising a variety of ways to draw repeat traffic to their sites, including trivia quizzes and mortgage calculators. Mr. Gumpert's company sells packages of information relevant to small businesses, and he is trying to coax banks to subscribe to his information service, which provides monthly updates. One bank that is considering a subscription to Netmarquee's product is Bank of Boston Corp. Ray Graber, marketing manager for the Web site, said the bank is looking at ways to provide interactive features, like on-line account applications or account transfer capabilities. Mr. Graber said the bank is also considering a service called "Rentnet" that lists apartment rentals on the Internet and might prove helpful to the many college students in the Boston area. Financial Post (Canada): Tuesday, August 27, 1996 Smart Cards Don't Have All the Answers-- Yet By MOTOKO RICH and GEORGE GRAHAM In Mission Impossible, Tom Cruise's latest film, the fearless Ethan Hunt breaks into the CIA computer room, disarming a technological stronghold by punching in numerical codes and submitting his eyes for a retina scan. While most viewers see such high-tech wizardry as fantastic, some of the gadgets may not be far from reality. Researchers worldwide are experimenting with technology that would allow not only security barriers but also electronic payment systems to use the retina, the handprint or even a facial expression as an identification method. "We are moving into the electronic age where money will just be information about the wealth you have," says Hans van der Velde, president of the European Union region of Visa International. Some companies believe that parts of the body, rather than paper or coins, can be used to establish the amount of money somebody has available to spend. For the time being, however, most participants in the payment industry believe the best alternative to cash remains the humble, but universal, plastic card. An increasing number of payment card organizations are replacing the magnetic strip -- the present industry standard -- with a tiny computer microchip that enables cards to be used not only to carry out financial transactions, but also to store data about the card's owner. A chip-based card is much more difficult to counterfeit than the magnetic stripe card and can carry details of a cardholder's insurance policies, medical history or driver's licence. It can be used to manage a retailer's loyalty program and even be used as a key for house or car. Above all, as a plethora of experiments demonstrates, it can be used as an "electronic wallet" storing value instead of petty cash. Pilot programs from the U.S. to Australia are testing the capabilities of these cards. In Britain, the most advanced trial is being conducted by Mondex, originally backed by National Westminster Bank and Midland Bank, and now owned by 17 banks. During the past year, Mondex has invited customers to use the cards in Swindon, where they can pay for small items like newspapers or chocolate bars without coins or notes. The cards are loaded up with value debited from the customer's bank account at automated teller machines or on "smart" telephones. Retailers can then take funds off the card without having to authorize each transaction online. While Mondex is in a race with other global payment organizations to develop and market its version of the electronic wallet on a global basis, several regional projects are harnessing the smart-card technology for a number of payment applications. Transcard, operated in western Sydney by Card Technologies Australia, combines an electronic bus pass with a re-loadable cash card that clocks up loyalty bonus points for buying McDonald's hamburgers or entry to the local swimming pool. In France, customers can pay for taxi rides, newspapers and phone calls with virtually ubiquitous smart cards. Sponsors of these projects are enthusiastic about the early results. "The technology works. That's probably more of a shock to people than anything else," says Beth Horowitz, MasterCard's vice-president for chip card business in Australia. Live testing has resolved some questions. Almost everyone now agrees that the electronic wallet must be reloadable, not a disposable fixed-value card that has been used for telephone cards or in Visa's Atlanta pilot. But for those who wish to exploit the global market -- worth an estimated US$ 4.3 trillion -- for card payments, there are some issues that remain unresolved. One is standards, an issue that plagues all new technological innovations, from the Internet to videocasette tapes. Although Europay, MasterCard and Visa, the largest global retail payments organizations, have developed international standards for chip cards, some systems -- notably Mondex -- do not comply. "The issue of standards has complicated the market for 15 years," says Gerald Hawkins, manager of card services at Lloyd's TSB in Britain. "It is one of the reasons why Mondex, while clearly a very advanced development, has taken a bit of a knock." The idea of a standard is that it would guarantee interoperability among systems, because retailers will want multiple terminals to accept different cards. Mondex argues that the market, rather than standards, will determine which cards will operate in point-of-sale terminals. It says that a number of these terminal suppliers have already demonstrated that interoperable equipment can be made to accept Mondex and all other magnetic stripe and chip cards. In fact, the EMV standards themselves have been criticized because they stick to "contact" technology, in which the chip must come into physical contact with a reader inside a slot. For high-volume applications in places such as railways or buses, contactless technology, in which a card contains a small radio transmitter or a stripe that can be read with a quick swipe, are considered more appropriate. "A contact smart card in a mass transit environment is just too slow," says John Hall, general manager for retail banking services for the Credit Union Services Corp. of Australia. The biggest problem of all, however, is ensuring the smart card makes financial sense. "The reason for all these projects is that no one has proven the business case. I'll be really interested to see if anyone makes money out of this," says Eugene Lockhart, president and chief executive of MasterCard International. The business case for the smart card has receded because telecommunications charges that once made online verification expensive are now coming down, and with them fraud rates. "Ten years ago you could justify the wallet on the basis that it would cut costs," says Peter Hirsch, managing director of consultants Retail Banking Research. "But now telecommunication costs are coming down and the business case is getting weaker. The chip is too expensive to give short-term returns." But at about US$ 14 apiece, a smart electronic wallet -- though more expensive than a magnetic stripe card -- is not completely devoid of financial advantages. Cash, which the wallet would partly displace, is expensive. The Association of Payment Clearing Services in London estimates that handling cash costs the British financial services industry about US$ 4.24 billion a year. For banks, the wallet could offer the chance to undo some of their past mistakes. In Australia, for example, the banks have pressed cards so far that they are being used for much lower value purchases than banks would like. "We don't think much of paying 20 cents to process a 95 cents transaction at McDonald's," says Hall of the Australian credit unions. For merchants, the replacement of cash means the elimination of considerable hassle. "If you take cash, you have to take it home, count it, put it into a night safe and then pay it into the bank the next day," says Richard Jackson, manager of Victoria News in Swindon, which accepts the Mondex card. But many retailers are likely to resist paying for the "privilege" of accepting the wallets. "Of course, there will be tough negotiations between individual banks and retailers," says Ron Clark, chief executive of Mondex in Britain. "We had this battle over Switch [the British debit card brand] with retailers who said they wanted us to provide it for free. But over time they have paid for it because it is a business proposition." Consumers, on the other hand, may prove much more difficult to convince that an electronic wallet is worth paying for when they can get cash for free. But Transcard charges US$ 7.82 a card, and says customers gladly pay it because the cost is covered within two weeks by the free bus rides they earn through a loyalty bonus scheme. "We have categorically proved that the consumer will pay," said David MacSmith, managing director of Card Technologies Australia. But it still may be difficult to persuade consumers to abandon cash altogether. "We are going to have a migration period of at least 10 years," said Lockhart of MasterCard. It will take even longer for more technologically advanced developments like the retina scan to move out of the film world into the marketplace. Richard Tyson-Davies, director-general of Apacs said: "The card is one of the most standardized items in the world. It is tremendously accepted and recognized so it would be a very bold person who threw that away." --- Dr.Dimitri Vulis KOTM Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps