Internet banking software and service vendors: change agents

Computer Industry Report,  Jan 22, 1999  

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After their sites are launched, the banks pay the service providers anywhere from $2 to $5 per month for every customer who signs up for the service. Today, a recurring fee of $3 per user per month seems to be the norm, but it can fluctuate if volume discounts are offered or banks have additional requirements such as bill payment or 24 x 7 technical support.

KEY TRENDS FOR 1999

Trends in the market for Internet banking applications and services include the following:

* Consolidation

* Real-time access

* Customer relationship management

* Commercial banking service

CONSOLIDATION

Currently, more than two dozen vendors are providing applications, hosting service and turnkey solutions to create fully transactional Web sites for North American banks and credit unions. However, that number is expected to decrease in the next 12 to 18 months as the pace of consolidation among suppliers continues.

In September 1998, HNC Software acquired Open Solutions (OSI) in order to beef up its client/server banking offerings. Earlier in the year, Intelidata invested $5 million in Home Financial Network, while Broadvision and Security First Technologies swapped shares to form a strategic alliance.

In addition, core processing companies such as Alltel and Fiserv, which have limited presence in the online banking applications market, will begin making heavy inroads either by developing their own products or by acquiring vendors that have proven solutions and customers.

REAL-TIME ACCESS

Increasingly bank customers will want real-time access to their financial records. As a result, banks that run their Web sites in batch mode will find themselves unresponsive to users who need real-time access to information for transactions like stock trading, shifting funds between accounts, and participation in electronic commerce around the clock.

A number of online banking applications companies continue to deliver data in a batch mode primarily because of the difficulties of replacing legacy applications with real-time systems based on client/server systems. Security First estimates that only 25% of its Internet banking solution clients are delivering real-time data to their customers.

IDC believes the likely winners in the online banking applications market will be those that can quickly convert a bank from a legacy environment to one that can offer Internet transactions on a real-time basis.

CUSTOMER RELATIONSHIP MANAGEMENT

The key to success for any online banking applications company will lie in its ability to give banks not just an online platform, but also a high degree of product differentiation. A Web site will then become a bank's strategic weapon to win and retain customers. Customer relationship management tools that enable banks to practice target marketing and customers to configure their own personal finance services will be increasingly important.

Vendors are preparing to offer such products. Bowne, for example, has acquired a number of Internet developers, including Open Sesame, Mountain Lake, and Quadravision, so it can offer end-to-end customer relationship management solutions to financial services companies.