Microsoft and FDC Joint Venture (MSFDC)
Q & A
June 1997
Business Issues
Q.Why did Microsoft Corp. choose First Data Corp. (FDC), and why did FDC choose Microsoft to work with?
A. Both parties recognize and value the core strengths each has: FDC’s in the financial services arena (transaction processing, database management, bank, biller and merchant relationships, etc.) and Microsoft’s in the software development, systems architecture, Internet and consumer interface areas.
Q. What is the name of the new company, and why did you choose that name?
A. The new name, MSFDC, represents a combination of the stock ticker symbols
“MSFT”
and
“FDC.”
Q. I’m surprised you didn’t choose to extend the Microsoft or FDC brand names into this new area — why not?
A. The two companies chose to come up with a new name to signify a new enterprise for both.
Q. What is the goal of this joint venture?
A. The goal of the new company is to offer the first end-to-end bill presentment and payment service that recognizes and integrates biller, consumer and bank needs in a single system. It also represents next-generation electronic payment technology that better utilizes existing payment systems and next-generation delivery technologies.
Q.What are the basic aspects of the venture and the service it plans to offer?
A. The venture will develop software and services that will enable the presentation of bills and statements over the Internet. Billers will transmit bills to the venture, where they will be stored for delivery to consumers. Consumers will then be provided the ability to pay this bill. The payment information will be routed electronically back to the biller and its financial institutions as specified by the biller.
Q. Does the joint venture involve an exchange of money or investment by Microsoft and FDC and, if so, how much?
A. We are not at liberty to discuss specific financial details of the joint venture.
Q. Where will the joint venture be based, and when will it be operational?
A. The joint venture will be based in Denver. It is operational today.
Q. How many people will staff this new company?
A. There will be fewer than 100 employees in the first year — we expect the number to grow to several hundred as transaction volumes build — most of them customer service and sales personnel.
Q. Who will manage the joint venture at the highest level — are Bill Gates and Ric Duques on its board?
A. The MSFDC CEO will manage the company. Both companies are represented on the board.
Q. Who is the CEO?
A. We’re not able to divulge that at this time.
Q.How does this map to Microsoft’s core business? I understand the reason FDC is interested in this area, but not Microsoft.
A. This joint venture represents Microsoft’s continued commitment at the highest level to both Information at Your Fingertips and to furthering Internet and electronic commerce.
Q. This seems to me like a major bet on Bill Gates’ part, to get into the financial services business — isn’t it?
A. Microsoft’s strengths are in the software development business. Microsoft’s tools, technologies and products are used in many different industries. For example, Microsoft® products are used widely in aircraft design, production and airline reservations systems and in the health-care industry. This doesn’t make Microsoft’s employees airline pilots or doctors. Nor does MSFDC have any intention of becoming bankers — we will not be managing personal bank accounts or holding deposits.
MSFDC doesn’t disintermediate the relationships between banks or billers and their customers — a biller’s customers remain the biller’s customers; a bank’s customers remain the bank’s customers. In fact, banks and billers like the idea that MSFDC is largely invisible to their consumers, much as the U.S. Postal Service is today.
Q. Why did you decide to form a joint venture, rather than simply working together?
A. Both companies wanted the strength and cohesion gained by forming a single company to accomplish a common goal.
Q. What is the role of the advisory board, and how much actual responsibility do its members have?
A. The advisory board members represent the leaders in the financial services, billing and payments arena. They will play a vital role in shaping the evolution of the service and in helping MSFDC make sure that it delivers the best possible product for all its constituents: billers, banks and consumers.
Q. Which billers are currently signed up for your product?
A. We will be making formal announcements later when the beta pilot becomes available.
Q. Which banks have signed up?
A. Several banks are working with MSFDC in an alpha test of the system at this stage. Others are expected to come online later in the year.
Q.How will the service be marketed?
A.There will be two primary methods for marketing the program. The first method will be through private-labeled consumer programs. Banks and select financial institutions will market the services to their customers under their own brand name. This will allow the banks and select financial institutions to build upon the service and incorporate it with their own service offerings. In addition, MSFDC will create marketing programs to help banks market the service to their consumers.
The second method will be for consumers to access the service directly through the Internet. The objective of offering the direct service is to allow consumers the opportunity to use the service if their bank or financial institution is not offering it. It will also build consumer awareness and create an opportunity for billers to send their bills electronically to a large number of Internet users.
Q. Which groups at Microsoft and FDC made this deal happen?
A.The groups involved were the electronic bill presentment and payment product unit in Microsoft’s desktop finance division in Redmond, Wash., and the Palo Alto, Calif.-based direct commerce unit of First Data’s integrated payment services division.
Q. Will the product be available internationally?
A. We have every intention of expanding the service beyond our initial U.S. focus and have started discussions in other countries. Given the differences in payment systems and billing practices, we will take each country on a case-by-case basis.
Q. Will Microsoft and First Data use their existing sales forces to sell the new products and services?
A. MSFDC will have a dedicated staff that will work exclusively on the program. We feel that this will provide the banks, billers and financial institutions with the best service offering. In addition, we will work with the Microsoft and FDC sales forces to ensure that the program and service offering are being sold as appropriate through all of our sales channels.
The Service
Q.When will the service be available?
A. We plan to conduct field trials starting in July and expect full consumer availability throughout the United States early in 1998.
Q.What will the product be called?
A. We are not yet ready to disclose the name of the service.
Q.How will the system handle recurring bills?
A. It will be simple for customers to pay recurring bills, without the hassle of envelopes, stamps, writing checks or worrying about late fees. Data for recurring bills need be entered only once, and it can be reused for subsequent presentations of the same bill.
Q. How will you educate consumers, banks and billers on how to use the product?
A. We have invested hundreds of hours of usability testing to make the product easy for consumers to use. We also offer online help and a customer service organization to help customers 24 hours a day. In addition, MSFDC employs professionals whose job it is to help billers and banks integrate the service into their existing business. A support organization is on call to help with any problems that a bank or biller may have.
Q.What will the product cost for billers? Banks? Consumers?
A. Bills are presented free to direct-service consumers and banks. Billers pay a nominal fee per bill delivered that is comparable to the cost of postage for paper bills but includes many other services and capabilities. Bank rebranders of the service pay an implementation fee.
Q. What is the financial institution (bank) branded program to consumers?
A.Consumers may elect to use a branded program for the convenience of accessing checking account balance information and other financial services. The financial institution will have the opportunity to bundle many services around the program and brand it as their own service offering to consumers.
Q.How do consumers enroll in the program?
A.Consumers can enroll in one of three ways: They can enroll in the program through their financial institution. They can enroll through a biller. Or they can enroll directly through the service. Enrollment processes will be determined by the company, but could include Web site enrollment or paper enrollment forms.
Q.If banks or billers want to learn more about the service, whom should they contact?
A.They should visit the MSFDC Web site, (http://www.msfdc.com/) , to learn more about the program and how to become involved, or call us at (303)488-8833.
Technology Issues
Q.What platform will your product run on? Are the system requirements the same for billers, banks and consumers?
A. To use the service, consumers simply need a Web browser that supports frames (e.g., Microsoft Internet Explorer 3.0). As an alternative, users of any Open Financial Exchange (OFX)-compliant personal finance management (PFM) software (such as Microsoft Money) may access the service via their PFM. The service software used by billers and financial institutions runs on The Microsoft Windows NT® operating system.
Q. There has been a lot of talk lately about security on the Internet, especially where consumer finances are concerned. What is the joint venture planning to do to provide complete security?
A.Security is very important to us and to our customers, and we are committed to the best available security and encryption technology. Access to bill data will require a password, and no financial data of any kind will be transmitted over the Internet in the clear. For users accessing their bills with a PFM, our service will support the application-level security required by OFX. And, of course, MSFDC will continue to support new security and encryption technologies and solutions as they are developed and when the infrastructure exists.
At a minimum, a user must have a browser that supports 40-bit secure sockets layer (SSL) encryption (both Netscape Navigator and Microsoft Internet Explorer support this level of encryption). Users can elect to choose 128-bit encryption, and we will support those banks that require this level of security.
Q. Does MSFDC guarantee the safety of transactions?
A.The MSFDC system provides more safety and security than today’s paper systems. MSFDC employs extensive security measures to help prevent fraud at the MSFDC Service Center. Obviously, MSFDC cannot ensure security at biller locations or customer PCs.
Q. Does MSFDC guarantee on-time delivery of payments?
A.MSFDC delivers payments to billers (payees) as quickly as possible (we do not hold funds to earn
“float”
). Billers may have different policies and procedures for accepting and recognizing payments; customers are responsible for understanding the biller’s policies. MSFDC will compensate users for late fees resulting from a failure of MSFDC to deliver a payment according to set performance standards.
Microsoft and Windows NT are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other counties.
First Data is a registered trademark of First Data Corp.
Other product and company names herein may be trademarks of their respective owners.
