Bank to the Future
Cheque it out ? the home banking market is really starting to hot up. But dealers can?t bank on their slice of value-add, they?re going to have to work for it, says Geof Wheelwright
The battle for the personal finance software market is set to move to an even more intense level this year as the largest players in this sector begin to reap the benefits of recent alliances with financial institutions ? particularly where home banking is concerned.
For dealers, this means there will be more pressure than ever from customers to make sure that dealers offer products that tie in properly with these newly combined personal finance/ home banking solutions. Although it has faced strong competition over the past couple of years, the company to watch in this respect is still Intuit ? particularly as it rolls out the fruits of its initial agreements for such ventures in the US and Europe.
In mid September, Intuit and the European Technology Fund (ETF), based in Manno, Switzerland, signed an agreement to form a new alliance company, Intuit Services Europe (ISE). The new company was chartered to handle all aspects of Intuit?s online banking efforts in Europe.
ISE is supposed to be the drive behind Intuit?s initiatives to have financial services providers initially in Germany, France, the UK, Spain, Italy, and the Benelux countries. The aim of these solutions is to connect customers to online banking services.
ISE is also aiming to champion Intuit?s Open Exchange framework to connect consumers and small businesses with banks and other financial services providers in Europe.
Intuit and its partner also seem aware that it would be distinctly unhelpful to appear to be imposing US standards on European financial institutions and banking customers. Therefore, the companies appointed ETF member Ugo Assi as head of the new alliance company.
As well as handling Intuit?s online services initiatives in Europe, ISE has developed versions of Intuit?s flagship Quicken financial management software for Italy and the Benelux nations. In these countries, ISE is the exclusive manufacturer and distributor of the localised Intuit software to all channels.
Intuit has, of course, been in Europe since 1992, when it launched Quicken in the UK. Since then, Intuit has introduced localised versions of Quicken in Germany, France, Spain and Austria ? and claims market leadership in Germany and the UK.
The company points out that it should perhaps come as no surprise that European institutions are willing to talk about home banking. The European market has long experience with electronic banking ? as anyone who ever accessed a Bank of Scotland account with an old Sinclair Spectrum in the mid 1980s can confirm. Germans, of course, have been doing electronic banking via the BTX system for years, as have the French with their Minitel system.
In fact, Intuit says that most major European financial institutions are cautiously experimenting with the internet ? more than 100 financial institutions in Europe have operational Web sites.
According to Intuit founder and chairman Scott Cook, all of these efforts highlight just how central the Net has become to Intuit?s future.
?Internet-driven software will enable one?s trusted financial adviser to know when and how to serve the client better,? he says.
?For financial providers, electronic channels will become essential to reach a growing segment of upscale customers. These channels will use technology and trust to acquire customers and build revenues at a lower cost to the financial provider.?
In the US, of course, the deregulated banking environment means that there are a lot more companies running banking services than in Europe ? and competitive pressures require them to sign on to new electronic services more quickly.
Late last year, for example, Intuit announced that 28 financial institutions would be the first to offer small businesses online banking and payment services through Quickbooks 5 and Quickbooks Pro 5 for Windows. Intuit says that most of the financial institutions that currently offer online banking through Quicken and Bank Now will now also offer these types of services to their small business customers through Quickbooks 5.
Quickbooks 5 and Quickbooks Pro 5 for Windows were launched late December to provide a new interface that is supposed to give one-click access to all key features in the software, including integrated online banking.
They follow the announcement last October of new versions of Quicken, which feature a lot more integration with the internet and the Web through Quicken Live. Apart from the ability to update Quicken itself online, this feature added new goodies such as Best of the Web. Offered in partnership with search engine provider Excite, it is designed to give Quicken customers access to descriptive reviews of what Intuit says are the best financial sites on the Web and financial information from Excite?s own team of financial journalists.
Microsoft has not been sleeping while all this has been happening. In the last four months of 1996, it was aggressively promoting Microsoft Money 97 to consumers, while striking deals with banks to offer tight integration with it.
In November, Microsoft announced its active statement technology for internet banking. This aims to enable Web banking users to automatically read and reconcile their banking statements directly into Money 97.
At the time of the announcement, US-based Wells Fargo Bank became the first major institution to agree to offer active statement technology to its customers through Wells Fargo Online, its internet-based online banking and bill payment service. In addition, Microsoft also unveiled deals with 31 community banks and credit unions that were implementing active statement technology in their Web sites, through processing relationships with Digital Insight and Online Resources & Communications.
The idea of this active statement technology is that it should let the user, with one click of the mouse, download a bank or credit card statement directly from the bank Web site into Microsoft Money 97, reconcile the statement, and even categorise the transactions for budgeting and financial planning purposes.
Microsoft has forged agreements with Digital Insight and Online Resources to launch active statement technology through 32 of the 46 financial institutions offering online banking services via the Net.
When Money 97 was unveiled in September, Microsoft already had agreements to provide access to online banking and bill-payment services through over 58 major banks and financial institutions, including American Express and Fidelity Investments.
In addition, Microsoft is hoping that US users whose financial institutions do not yet offer online banking will still take advantage of the bill payment services integrated into Money 97. Most transactions are supposed to ?cost less than the price of a stamp? and offer the ability to preset recurring or automatic payments such as mortgages and loans.
According to Lewis Levin, vice president of the desktop finance division at Microsoft, it is about being in the right place at the right time. ?The explosive growth in sales of home PCs and modems makes this the right time for users to take advantage of the convenience of online services,? he says.
?People have been banking online for years through ATMs, and they are now embracing having access to those same services and more, in the comfort of their own home.?
Other new home banking features in Money 97 includes online setup, which users initiate by typing in the routing number from the bottom of their cheque or the first six digits of their credit card. Money will configure itself to take advantage of the online services offered by their bank or online bill payment provider.
There?s also, as you would expect, more internet integration as users get single-click access to their financial institutions? Web sites from within the home banking area. The secure online banking features in Microsoft Money 97 claim to allow immediate, 24-hour access to checking, savings and credit card information.
Customers should be able to download statements automatically; maintain up to date account balances; transfer funds; check the status of a bill, deposit or cheque; and communicate with banks by email.
Personal finance packages are getting into big money. They are no longer just glorified tools for reconciling cheque books. This should present a great opportunity for dealers as consumers rush to take advantage of them.
There are a few caveats, however. The first is that dealers themselves should know a lot more about this product than they do about the average wordprocessor or spreadsheet.
The banks may also move in, with a number of them likely to provide copies of Quicken or Money as part of their online banking service ? leaving dealers to figure out just how they can add value after the fact.
So, for dealers looking to make sense of this market in the rest of 1997, the only definite thing you can say is that it will be a fulfilment of the famous Chinese curse, ?May you live in interesting times...?