The Microsoft-Intuit Merger: The Intervention that Worked
and the Dangers Today from Microsoft's Monopoly Practices in
the Online Financial Marketplace

Creating New Internet Standards for the Banking and Finance Industry

By fall of 1996, Intuit itself was fully committed to moving its customers to the Internet and sold off its proprietary system for electronically paying bills to a company called CheckFree. Intuit received a stake in CheckFree but began to focus on building Internet standards into its software and creating a Web-based interface for its customers. It eliminated the proprietary online standards in all of its software in favor of Internet-based links. The company's BankNow service, originally introduced on AmericaOnline, has been brought directly onto the Web to allow customers to check bank balances and transfer funds at any participating bank. Its web site both supplements its software and gives any Web surfer access to a range of financial information and tools, including new services oriented to stock trading, insurance purchases, and home mortgages. Microsoft has worked to match these services through its own software and its Microsoft Investor web site.

As both companies raced onto the Internet in 1996 and 1997, they created a joint standard with CheckFree, called Open Financial Exchange (OFX), to create a common system for financial institutions, businesses and consumers to conduct transactions electronically over the Internet. Since controlling such standards, which would regulate much of electronic exchange on the net, was the original goal of Microsoft's proposed acquisition of Intuit, having to work with other companies on a joint standard was a testament to the antitrust success of blocking the merger.

Taking what had been three separate initial approaches--Microsoft's Open Financial Connectivity, Intuit's OpenExchange and CheckFree's electronic banking protocols--the companies created one open standard accessible not just by the three companies involved but by any business. OFX was quickly endorsed by a range of institutions, including Bank of America, Chase Manhattan, Citibank, KeyBank, and Wells Fargo. The OFX partners created a Banking Steering Committee with responsibility for dealing with future issues effecting OFX and setting its direction for the future. Fidelity Investments, Charles Schwab and Dean Witter joined a similar brokerage steering committee to help determine standards effecting financial investments, while the Home Financial Network, Peachtree, Vertigo and even rival software MECA have joined a steering committee governing financial applications software.

If the competition between Intuit and Microsoft was not enough to keep OFX standards open, a whole alternative financial transaction standard called Integrion is vying for loyalty, This alternative standard was created largely by IBM and some of the largest banks--many of them joint owners of MECA--in early 1997. In fact, it was the existence of a viable MECA software that created the possibility of this alternative approach, since MECA is developing much of the Internet-based banking transaction capability for the Integrion platform. A third standard developed by Visa called Visa Interactive was acquired by the Integrion consortium in late 1997, further strengthening its position by incorporating its customers into the Integrion standard. Intuit has also begun supporting the Integrion standard as well as the OFX standard and there are strong efforts to combine the two standards into a single open Internet standard for financial transactions with broad involvement by all sectors of the business community. While it is conceivable that this non-Microsoft controlled result could have occurred even with the Intuit-Microsoft merger, it seems unlikely.

Next: Remaining Dangers of Monopoly: How Microsoft is Still Working to Dominate Online Commerce

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