Internet banking software and service vendors: change agents

Computer Industry Report,  Jan 22, 1999  

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As an increasing number of banks are severing their ties to mainframe systems by adopting a distributed computing environment, new opportunities have arisen for companies such as Corillian, Open Solutions, Phoenix International, and Prologic. With their NT-based client/server solutions, these vendors have transformed the core processing operations at scores of banks and credit unions. "Core processing" refers to the way banking software handles a bank's core accounting functions (such as general ledger). The need to deliver real-time data to their customers online has reinforced banks' commitment to run their data centers with powerful relational databases like SQL Server and Oracle.

Vendors like those mentioned above are betting that the databases will become so versatile that a whole range of executables and applications will be embedded in them and users will be able to make direct queries over the Internet to obtain customized information, bypassing the need to search for data from some legacy applications.

This idea is particularly appealing to banks that are smaller but more technically savvy. For example, Crews Banking Data Center, which has three banks in Florida, chose Phoenix International to overhaul its core processing system and add new features like Internet banking. Compubank, an Internet-only bank, chose Prologic to handle its back-office operations.

Internet banking solutions may become an important selling point. For example, Savings Bank of Manchester in Connecticut installed the Internet banking module from Open Solutions along with its Complete Banking Solution. The entire project cost close to $1 million, but Savings Bank expects the system to yield savings of more than $500,000 a year.

Despite such implementations, many of the nation's top 100 banks have steadfastly held onto their mainframes and considered the Internet banking applications quite distinct from their core functions.

That's where middleware offerings such as that from Corillian come into play. Corillian's Voyager platform will connect a bank's mainframe and a Web front end hosted by an interface vendor such as Home Financial Network. This could become a viable alternative for banks that want to straddle the old world and cyberspace.

INTERNET BANKING SERVICE PROVIDERS

Service providers have always played a pivotal role in the banking industry. Vendors such as Electronic Data Systems and Fiserv have been handling the core processing tasks for large and small banks for decades. Over the past two years, a new wave of service providers has entered the marketplace, fulfilling the Internet banking requirements of these institutions. These providers include companies such as Integrion, Security First, Digital Insight, Q-Up, nFront, Virtual Financial, Fundsxpress, First Data Direct Banking, and Online Resources Communications Corp.

For an initial implementation fee of $20,000 or more, these providers can set up and host bank Web sites. Some of these service providers, such as Online Resources, offer proprietary applications. Others, like M&I Data Services, license applications from vendors such as Security First and resell them to their customers.