Check, Please - Company Business and Marketing

Industry Standard, The, June, 2001 by Dominic Gates

CHECKSPACE TAKES ON PAYPAL IN THE ONLINE PAYMENTS MARKET.

When Bassam Saliba left his job as CTO of TransPoint, an online bill-paying joint venture between Microsoft, Citibank and First Data Corp. that he co-founded, he bought a condo in Colorado and planned a long ski vacation. He had spent 10 years with Microsoft, and needed to decompress. But Naseem Tuffaha had other plans for his former colleague, and he laid them out in detail over a cell phone as Saliba rode the lift up Copper Mountain.

Saliba, who left Redmond, Wash., in February 2000 when rival CheckFree bought TransPoint for $1 billion in stock, liked what he heard that day on the lift. After just a week of skiing, he returned to co-found CheckSpace, a startup based a few miles from Microsoft's campus. This time he's taking on a different segment of the online payments market.

CheckSpace aims to provide small businesses with online invoicing and payments processing services. From within popular desktop accounting applications such as Peachtree or Intuit's QuickBooks, business owners can send invoices and pay bills via e-mail.

CheckSpace isn't the first player in the small-business market. PayPal, the Palo Alto, Calif., company whose person-to-person online payment method has brought it 8.2 million users -- many of them on eBay -- struck a deal with Intuit to integrate its service into QuickBooks 2001, released in January. With that, PayPal aims to expand beyond e-commerce into real-world small businesses, where QuickBooks claims 80 percent of the accounting software market. CheckSpace works with QuickBooks and other accounting software, but it isn't as seamlessly integrated as is PayPal.

While Intuit likes PayPal, the banks do not. When a bank customer uses PayPal to pay a bill, money moves from a bank account to a PayPal account. The bank doesn't know where it goes afterward, and it doesn't get a cut. CheckSpace execs say that's where their company has the advantage: CheckSpace will license the platform to banks, which can cobrand it for their own small-business customers and share the revenue from the transaction. "CheckSpace is effectively the arms supplier to these banks," says CEO Tuffaha. "If they try to build it on their own, it'll cost them several million dollars and take at least a year.

Now all CheckSpace needs is a major bank deal. Negotiations go on, but there's nothing to show yet -- banks are hardly agile new-economy innovators.

Meantime, Tuffaha and Saliba have to come up with a new moniker for the company following settlement of a trademark infringement suit filed by CheckFree. Which leaves the startup literally trying to make a name for itself.