COLUMBIA, S.C. – Has Internet banking gone from leading edge tobackyard hedge? As home banking has become a standard offering forfinancial institutions of all sizes, it's common to hear that ithas become a commodity (a definition of which, according toMerriam-Webster, is a “mass-produced unspecialized product.”)Indeed, the number of companies offering Internet banking to creditunions has grown – now including core processors that provide basictransaction functionality and data processing – and the majorplayers in credit union land are forging their own paths tosurvival and success. For instance, California-based DigitalInsight was an early expander into cash management solutions andhas been acquiring and forging partnerships to expand itse-commerce offerings. Meanwhile, Corillian Corp., which boasts anumber of big credit unions as clients, has concentrated onbolstering the functionality of its flagship Voyager platform,including for the prized small business and corporate market, andhas just recently partnered with NCR to offer its services in aservice bureau, or ASP, environment. And Online Resources Corp. islooking to expand the adoption of bill pay and account aggregationsolutions along with integration of its core Internet bankingservices with call center and marketing services. The competitionis everywhere, and the first volleys often involve price. “There'sno question that Internet banking per se is being commoditized. Andcertainly there are more players,” says Bob Meagher, executive vicepresident of sales and marketing at Internet banking pioneerDigital Insight, which began in the credit union industry and nowserves more than 1,100 financial institutions. “With that beingsaid, the solutions being introduced are more generic in nature,due in large part to the downward price pressure being placed onbasic service,” he says. But at least one industry insidermaintains that Internet banking as a basic commodity has becomeharder to find for many credit unions. “Gone are the days of yorewhen you could buy a good, basic yet flexible, inexpensive tool kitfor Internet banking and it would be supported,” argues TrippJohnson, a consultant with Cornerstone Advisors of Scottsdale,Ariz., a consultancy that helps credit unions and banks sortthrough proposals and choose vendors. Johnson and his colleaguesspend a lot of time working on core processing proposals and hesays he has seen some of those companies, including some Fiservunits, for example, “implement a very good middleware platform forInternet banking, although I see more service bureau choices thanthere are for in-house. “Really, whoever owns the middle dictateswhat happens on the front and the back. That's why you see S1, forinstance, trying to be the integration platform for all that.” And,he says, he's been surprised by the cost from many online bankingvendors, core processor and Internet specialists alike. “A coupleweeks ago, I was running numbers for a credit union client and wasfloored by the cost of this stuff,” Johnson says. “It was all overthe map, from a hundred grand to $800,000. I was trying todifferentiate between them, to figure out why there was such a hugedelta, and I honestly couldn't come up with an answer.” The deltamay be in the details. “When one says Internet banking now, you'reimplying bill pay and a bunch of other services. I would hardly saythat is commoditized,” says Matt Lawlor, chairman and CEO of OnlineResources, which provides Internet banking services to more than700 financial institutions, more than 400 of them credit unions. “Ilike to say that Internet banking is the razor and the otherservices are the blades. The razor is the commodity, but how youintegrate the blades is becoming increasingly important,” Lawlorsays. Lawlor's Virginia-based company has been on the leading edgeof bill pay and electronic cash management, including with itsMoney HQ aggregation and money management solution. It also hasjust made its first acquisition, buying Incurrent Solutions, amajor supplier of credit card processing technology. “We're theonly provider that has a bill pay engine and Internet banking underone roof, so it's seamless and we can provide a level of skill inintegrating those services and a call center and integratedrelationship and marketing management that others just don't have,”Lawlor says. Tough words in a crowded market. The major players,indeed, are well familiar with each other, crossing pathsfrequently as they work to hang on to existing clients and sign upnew ones. And despite the growing competition from Internet bankingplatforms from core processors and smaller shops, the majoropposition has remained the same for at least one of the majorvendors. “Digital Insight and Online Resources are our biggestcompetitors,” says Chuck Drake, vice president of marketing atOregon-based Corillian, which includes 12 of the 100 largest creditunions in the country on its client list. “They traditionally havea large number of credit unions initially attracted to the ASPmodel, and for many smaller credit unions, the service withoutowning software is just what they need to provide basic onlinebanking,” Drake says. “But for midsize to large CUs trying to meetthe growing needs of their members and competing with banks,they're now finding that the one-size-fits-all approach is animpediment,” he says. Instead, he says, “it's no longer just aboutfeatures and function, like it was in the earlier days. Now it'sall about making the online channel more effective, comparing theirservices to Yahoo and other places that people can do businessonline.” Meagher, the executive in charge of sales at DI, also seesa diverse marketplace competing for consumers' hearts and wallets.“I would argue that there is no single competitor who'sdominating,” he says. “If we look at our win-loss ratio for thepast year or so, none really stand out. So even though there aremore entrants, we're not really missing that many deals.” Meagheralso argues that the vendor's price tag is not all that matters.“Certainly some of the losses we're seeing are based very heavilyon price, but I would argue that less and less people are asconcerned about price as they are about having a robust offering interms of functionality and usability,” the DI executive says.Digital Insight's approach, in that regard, has been to moveaggressively into cash management, bill pay and other servicesthrough in-house development and increasingly, third-partyalliances. “We've gone from about 10 third-party vendorrelationships to about a hundred,” Meagher says. “That's just overthe past few years, and for us, that's quite a big change, since wegrew up as an engineer company that was all about productdevelopment. “What that allows us to do is really offer clients abest-of-breed approach, which again, is something that a lot ofcore processors or other home-grown application suites can't ordon't want to do,” he says. Johnson, the Cornerstone Advisorsconsultant, says they might not need to. “I've been thinking aboutthis a lot lately, about where do we go next,” he says, “and I justdon't see the next killer app on the horizon in Internet banking.“We've tapped the bill pay, we've had some success withpresentment, aggregation has been very hit and miss. As far asintegration goes, I've seen some banks and credit unions doing OKwith tying together call centers and the Internet, but I haven'tseen that happen on through with the branches and ATMs. “I guesswe'll see a real uptick in online enrollment in services whenthings are tied together better, when the same process of openingan account that takes three minutes online doesn't take an hour inthe branch.” Johnson also says he thinks that some smaller andregional players, such as 450-client HomeCU and corporate CUSOMemberStreet, are getting renewed attention as smaller creditunions look for simplicity and savings in their Internet banking.“My bigger credit union clients are desperately looking for a toolkit to be able to do it themselves, easily and affordably,” headds. -

[email protected]