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[NEWS] Crypto-relevant wire clippings

New York Times, Tuesday, September 17, 1996

Intuit Selling Bill-Processing Unit For $227 Million


Intuit Inc., the United States' leading seller of personal-finance
software, announced Monday that it would sell its electronic
bill-payment processing business to its main competitor in that field,
Checkfree Corp., for $227.6 million in stock.

Intuit, which also announced widening financial losses Monday, now
intends to focus on its core software businesses, while expanding its
services over the Internet.

The deal with Checkfree comes as Intuit is under pressure from the banks
it works with, which want to expand their options for electronic
bill-processing. Currently, banks wishing to provide electronic services
to consumers using Intuit's popular Quicken personal-finance software
have had to operate through Intuit's bill-processing subsidiary, Intuit
Services Corp.

Lately, consumers and financial institutions have shown a preference for
conducting business over the Internet rather than over proprietary
networks like Intuit Services. But while Intuit had come to view bill
processing as a costly distraction, Checkfree said that adding Intuit's
operations would be a cost-effective way of expanding its own main line
of business.

Checkfree, based in Columbus, Ohio, markets its electronic
transaction-processing services exclusively to banks and other financial
institutions. Those customers use Checkfree's services to provide home
banking and bill payment to consumers. Unlike Intuit's network,
Checkfree's operations will work with a variety of personal-finance

With the acquisition of the Intuit Services unit, Checkfree gains
Intuit's relationships with 39 banks and more than 300,000 electronic
bill-processing customers, bringing its total number of bank customers
to 181 and its consumer base to nearly 1.2 million.

The companies, both of whose stocks surged on the news, said they
expected to close the deal by the end of the year, pending regulatory
and shareholder approval. Intuit's stock rose $2.125 a share Monday, to
$32.25; Checkfree gained $3.1875, to $21.25.

Wall Street analysts applauded Intuit's decision to withdraw from what
they said amounted to the back end of the transaction-processing
business, at a time when more full-fledged electronic commerce may
finally be catching on.

In the future, analysts said, Intuit's best on-line opportunities will
be in providing a consumer ``interface'' to the Internet, rather than
getting bogged down in the pipes and plumbing of transaction processing.

And while Intuit remains the leader in its core business - personal
financial-management software - the company is facing increased
competition from Microsoft Corp., maker of a program called Microsoft

Microsoft had agreed to acquire Intuit in October 1994 in a deal worth
roughly $2 billion, but abandoned that plan last year under antitrust
scrutiny from the justice department.

``It's a strategy shift,'' Lise Buyer, an analyst at T. Rowe Price in
Baltimore, said of Intuit's announcement. ``But it's impressive that
Intuit is willing to reverse course so quickly.''

Scott Cook, founder and chairman of Intuit, which is based Menlo Park,
Calif., said that transaction-processing had become a distraction.

``It was a sizable investment of dollars but also of management time and
resources, in a business that is not central to our core competencies,''
Cook said.

As a result of the deal, which includes the transfer of 12.6 million
shares of Checkfree stock, Intuit will acquire a 23 percent stake in
Checkfree. Intuit executives said they planned eventually to reduce the
company's share to 19.9 percent, in order to operate as a minority
shareholder and not have to carry Checkfree's results on Intuit's books.

Intuit also announced widening losses for its fiscal fourth quarter
ended July 31, which it attributed to recent acquisitions of companies
that included Interactive Insurance Services Corp. Including charges,
the fourth-quarter net loss grew to $22 million, or 48 cents a share,
from $1.4 million, or 3 cents a share, a year earlier. That was in line
with analysts' expectations.

Checkfree's chief executive and chairman, Peter Kight, said that his
company would lose money in 1997 as a result of the Intuit Services
acquisition. But he called it a necessary step, as banks step up their
on-line efforts.

While the Checkfree acquisition may be subject to government scrutiny,
neither analysts nor the companies expect any antitrust delays -
primarily because there are other large competitors in the electronic
check-clearing business.

Last week, for example, IBM added itself to that list, with the
announcement of Integrion, a venture with 22 banks to provide electronic
bill-processing and other transactions.

The Checkfree deal will enable Intuit to concentrate on its growing
array of Internet-based on-line services. Bill Harris, Intuit's
executive vice president, said Intuit would begin to offer ``front-end''
banking services over the Internet by late next year.

American Banker: Tuesday, September 17, 1996

Rumors of MasterCard's Plans To Buy Mondex Nearing Reality


MasterCard International is nearing an agreement to acquire Mondex, the
stored value smart card technology developed by National Westminster
Bank of London.

The deal, which has been the subject of months of negotiations and
rumors, was hinted at in a speech that MasterCard president H. Eugene
Lockhart made in China 10 days ago.

Officially, MasterCard and Mondex refused to comment, but sources inside
both companies confirmed that a deal is imminent.

Mr. Lockhart said in his speech that MasterCard would announce a major
acquisition in the chip card sector in the next month. According to
Reuters, he said the acquisition "would be global in scope and involve
an alliance of 20 major banks."

He also said MasterCard would own the "intellectual property rights
stemming from the deal."

National Westminster spun off its smart card unit in July, creating
Mondex International Ltd., a joint venture with 17 bank partners
worldwide. With three Japanese banks close to announcing Mondex
franchises, the 20 banks referred to by Mr. Lockhart would be accounted

Mr. Lockhart also told Reuters that People's Bank of China is
considering a smart card launch. He may have mentioned the pending
agreement to entice the bank.

Mr. Lockhart was in China to promote Maestro, MasterCard's on-line debit
brand, which will now be available through the Agricultural Bank of

Industry observers thought Mondex's incorporation in July laid to rest
rumors of a MasterCard takeover, which were circulating all summer. But
it may have served to make the smart card company more attractive.

"Before the announcement, Mondex looked a little tenuous," said a
knowledgeable source. "After the (incorporation), it looked like
something of value."

The source also said that MasterCard's smart card strategy, which began
with considerable fanfare more than two years ago, has fallen short of
expectations, prompting Mr. Lockhart to seek a remedy.

MasterCard's major smart card venture has been a pilot in Canberra,
Australia, which started nine months ago. Visa, by contrast, is running
several tests of its stored-value system globally. Several executives
responsible for MasterCard's early efforts, including Philip Verdi and
Robin Townend, have left the company in recent months.

The deal would be a boon to both companies, sources said. While Mondex
has increased its clout with incorporation, it's still facing "an uphill
battle" to achieve worldwide acceptance, said the source. "Distribution
is what you could assume Mondex is after," he added.

National Westminster retained ownership of Mondex patents and trademark.

It stands to recoup its substantial investment in the technology -- on
top of a potential $150 million from Mondex franchise owners -- if the
MasterCard deal is consummated. The bank remains a minority shareholder
in Mondex International.

Though the industry pooh-poohed National Westminster's initial efforts
to put the fledgling payments system on the map, persistent marketing --
coupled with a strong technological base -- seems to be paying off.
Electronic wallets, smart phones, and card-to-card monetary transfers
set Mondex apart from some less ambitious smart card programs.

With powerful investors like Wells Fargo & Co. in the United States,
Royal Bank of Canada, as well as Hongkong and Shanghai Banking Corp.,
the new brand has gained credibility as a major contender in the chip
card market.

"Mondex blazed a trail," said Peter Hall, PSI International's managing
director of consulting in London. MasterCard would be "buying into a
pool of knowledge, buying into the partners," he added.

Card industry sources said MasterCard and Mondex have many details to
address before they can conclude a deal, including corporate structure
and governance.

One of the biggest issues will be whether to retain the Mondex trademark
or "go with the strength of the MasterCard brand," said a source close
to the deal. That decision will be made "down the road," he added.

The deal is expected to close within three months. No papers have been
signed to date.

American Banker: Tuesday, September 17, 1996

Chase to Offer Dealerships Auto Loan Decisions Over Internet


Chase Manhattan Corp.'s auto financing division has begun using the
Internet to provide dealerships with loan-approval decisions.

The bank is the first of eight financial institutions that have
committed to using the system, developed by International Business
Machines Corp.

By computerizing loan applications and sending data electronically,
Chase officials said the bank can grant approvals in as few as two

"It reduces my costs and adds to dealer satisfaction by getting a quick
turnaround," said James B. Brew, president of Chase Automotive Finance

Up to 50% of the division's auto loans will be running through the
system within the next 18 months, he said.

Chase, the largest car lender not affiliated with a car company, is
connected to six dealerships currently using the system and will
establish connections to 100 dealers with the official introduction in

Other financial institutions planning to use the on-line system include
NationsBank Corp., Charlotte, N.C.; GE Capital Auto Financial Services
Inc., Barrington, Ill.; Regions Financial Corp., Birmingham, Ala.; and
Citibank Puerto Rico. The auto finance program, residing on the dealer's
personal computer, features a user-friendly screen display with
step-by-step instructions and error checks. Auto dealers can manually
override the screens. The dealer's computer is connected to the Internet
through the IBM Global Network, which is also used to retrieve an
encrypted report from a credit bureau.

The dealer's pre-established "key" decodes the report and causes the
screen to display one, two, or three stars - representing poor, fair, or
good credit. This gives the dealer an idea of which financial
institutions are most likely to approve the loan.

"If the consumer is looking over the dealer's shoulder, they don't see
the word 'loser' flash on the screen," said Neil Lustig, manager of the
project for IBM, explaining the rating system.

Although Chase currently is the only bank with a direct Internet
connection to the system, the dealer can still send loan applications to
other institutions by adding their fax numbers to the screen display.

"We piloted this in our Saturn dealership, and it lent to the customer-
friendly atmosphere perfectly," said John Burns, a dealer in Hempstead,

The system costs about $700 a month, but it can also replace existing
printers and fax machines.

"The old system involved faxing applications which came back with the
credit worthiness in a few hours," Mr. Burns said.

Now, "the information is going in immediately and is analyzed
immediately. If there is a glitch, you can discuss it."

IBM said it plans to extend connections for peripheral services like
auto insurance and extended warranties. In about a year, the company
plans to publish a World Wide Web site offering auto insurance directly
to individual customers, said Mr. Lustig.

"When enough people use the Internet, the economic model will change,"
he said. "If we did that today, we would just disintermediate the

News Release (Wired): Tuesday, September 17, 1996

Citibank's Retired CEO Walter Wriston on the Future of Money

SAN FRANCISCO Though he's in his 70s, Walter Wriston may be the world's
most wired banker.

As chairman and CEO of Citibank in the '60s, '70s and '80s -- a time
when money began turning itself into digital bits and bytes and flowing
around the world via satellite transponders and fiber-optic cables --
Wriston was a major force in the creation of the modern, global,
technological financial system.

Wriston retired in 1984, but his vision of banking is still

In an interview with Thomas Bass in the October issue of Wired, Wriston
talks about digital money, the new economy, and prospects for the
nation-state in an increasingly borderless, networked world.

During Wriston's reign, Citibank became the banking industry's
technology leader, guiding its customers away from the local teller
window toward a new way of banking -- automated, online, checkless, and
international, based on distributed networks of computers and ATMs. When
Wriston retired, Citibank was the largest bank in the country, and its
investment in computer hardware and software approached US$1.75 billion.

In a revealing exchange, Wriston doubts whether banks will be running
the financial supermarkets of the future as they continue to lose ground
against non-bank financial powerhouses, such as Merrill Lynch and
General Electric.

Wriston says the future of cash lies in smartcards. Already in wide use
in France, Japan, and Germany, smartcards can be secure and
rechargeable, protected by digital photographs or DNA signatures.

According to Wriston, the creation of an international standard for
encryption is inevitable "because it's necessary for the safety of the

What about the export controls on strong encryption imposed by the U.S.
government? Wriston says to lift them: "You can buy better stuff in
Europe than you can here. We don't have a monopoly on brains."

As for censorship on the Net? "There is no way on God's green Earth the
government can exercise censorship of the Net in any meaningful way."

On the nature of markets, Wriston believes the spread of economic
freedom leads to the spread of political freedom. "Markets are self-
correcting. That's why I trust markets more than governments.
Governments usually aren't self-correcting, until it's too late." Find
out why the value of money is hooked to nothing other than the
information that flows through it -- in the October issue of Wired.

Thomas Bass is the author of "The Eduaemonic Pie." His latest book,
"Vietnamerica: The War Comes Home," is published by Soho Press. Wired
4.10 is available on newsstands for US$4.95, by calling 800/SO WIRED, or
by sending email to [email protected]

Fortune: September 30, 1996

What's New About Digital Cash?

By Justin Fox

E-money is coming, and it's about time. The advance of "smart cards,"
digital checks, and Internet cash will change how people shop and do
business. Banking should become more efficient and less aggravating. It
may even become possible to make money on the Net. But don't let all the
conferences, cover stories, and alarmist pronouncements on the subject
get you too excited--or scared. E- or no e-, it's still just money.

For currency traders and others dealing in huge sums, who have long been
able to zap billions of dollars across the globe in seconds, money as
electrons isn't anything new. Nearly 90% of the money that changes hands
in the U.S. every day does so electronically.

It's that other 10%, which slouches along in the form of cash and
checks, that e-money promises to change. And why not? Would anyone wax
nostalgic about today's unbearable slowness of check clearing, in which
banks that do their bookkeeping on computers hire fleets of airplanes to
fly bundles of paper checks around the country every night?

It will be years before the planes are grounded, but there are already
signs of hope. Lots of regular transfers, like paychecks, are already
handled electronically; banks are offering checklike debit cards; and
Visa is testing utility bills that are sent out and paid online. Visa,
Mastercard, and a British multibank venture called Mondex are rolling
out chip-based smart cards that can store digital cash. The card
companies, banks, and assorted startups are on the verge of making it
easy and (relatively) safe to pay for things over the Internet. These
e-money peddlers smell huge opportunities in the $ 4 trillion of U.S.
consumer purchases that are still paid for each year with cash and
checks. "If we can just electronify a small percentage of that, you can
see what that will do to our business," says Carl Pascarella, CEO of
Visa USA.

A few problems need solving before e-money achieves ubiquity--like fraud
and consumer resistance. But credit cards overcame similar problems in
the 1960s, and like credit cards, e-money is too compelling not to take
off. E-money costs much less to handle than paper cash or checks, and it
offers consumers the ease and safety of credit cards without many of
their limitations. (Credit card transaction costs make small payments
uneconomical; they can only be used to buy things from merchants who are
part of the card network; and they do not offer the protection of
anonymity.) When e-money does hit it big, it will profoundly change--and
greatly expand--electronic commerce. Software could be paid for on a
per-use basis--a tenth of a cent a time, say. Journalism could be bought
by the article. Anybody could set up an online business and instantly
rake in revenue.

What e-money probably won't do, however, is fundamentally transform the
nature of money, although a lot of technoprophets think it will.
Auguries tend to vary on a theme: Money and central banks as we know
them will disappear, national currencies will become extinct, etc. A
particularly alarming Web tract on the topic predicts we'll all be
tattooed with something akin to a universal pricing code to make sure
we're not using someone else's smart card. Hidden in the code will be
the numbers "666." And we all know what that means.

Mainstream economic theory has no answer for the 666 contention, but the
other concerns (or hopes, depending on who's talking) are pretty easily
dismissed as overheated hoo-hah. The one truly revolutionary change in
money over the past couple of centuries has been the switch from coins
made of precious metals to notes made of paper. It was in 1971, when the
world's major currencies threw off their last remaining shackles to
gold, that money became imaginary stuff, its value derived purely from

Compared with that, switching from paper imaginary money to digital
imaginary money simply isn't that big a deal. It won't expand the money
supply. It won't of itself make national currencies irrelevant. Digital
money can indeed move faster, over mountains and across borders, than
paper checks or cash--hence reducing governments' ability to control its
flow. But the big money started moving this way in the 1970s, at the
time setting off all sorts of alarms about the loss of central bank
power. "The striking parallels give the distinct impression that 'we've
been here before,' " Fed governor Edward Kelley said at a recent
conference. "Then as now, the potential impact on monetary policy of new
electronic payment products has been greatly exaggerated." Fed governors
can be wrong, of course. But since much economic activity will remain
forever off line, it's hard to see how e-money could entirely supplant
national currencies in the real world. Unless technology makes it
possible to digitally pay for and deliver, say, a pizza. When that
happens, there will be no denying it: E-money (and e-anchovies) will
have transformed the world. --Justin Fox


<a href="mailto:[email protected]">Dr.Dimitri Vulis KOTM</a>
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps