CU Times Technology Correspondent

BOSTON -- If ever there was a time to introduce or expand your credit union's mobile and online offerings, that time may be now.

According to Aite Group's Gwenn Bezard, the number of vendors and applications supporting such offerings are at unprecedented levels. In a new report, Bezard also finds the nation's leading financial institutions eager to reap the benefits.

Of the solutions highlighted, mobile banking, e-mail communications and enhanced fraud detection lead the pack in terms of planned expansions over the next 24 months.

"Vendors that fail to differentiate through thought leadership and unique technology on those issues," the Aite Group co-founder and research director said, "will miss an opportunity to foster deeper relationships with their target market."

To back up his argument, the report showed that 60 percent of banks surveyed by Aite Group indicated a desire to introduce a mobile solution in the next two years. Two-thirds of these same individuals planned to supplement this solution with mobile bill payment.

Along these same lines, nearly half of Bezard's sample was committed to introducing an e-mail alert system by 2010, with nearly this same number slated to provide fraud detection and transaction monitoring applications.

With such strong commitments to expansion, it's perhaps not surprising to discover a slew of suppliers eager to support these initiatives.

"Among 30 of the top 80 financial institutions for which we have data available," said Bezard, "we count as many as 36 vendors across 16 key online banking and mobile banking applications."

Despite such diversity, only a small number of vendors currently provide core bill payment front-end and processing solutions. The greatest multiplicity, Bezard found, lies in the more niche solutions and vendors who support them.

The result is a complicated provider and application battlefield, the think firm's report said. On one hand, the largest providers--with core business dedicated to bill solutions--face tough competition if they seek to expand into more niche offerings. This latter business segment and its accompanying technological layers are dominated by smaller organizations specializing in individual solutions, the report said.

On the flipside, smaller and more niche vendors eyeballing the larger payoff of providing core solutions are staring at business juggernauts owning the space. Thus, high-risk and upfront costs greet smaller vendors looking to augment existing products and services.

As a result of this dichotomy, many financial institutions--Bezard discovered--are still looking internally until the marketplace settles.

"Despite the variety of technology vendors lined up to serve financial institutions, the reliance on homegrown solutions remains important. Most institutions in our sample use a homegrown solution for online account opening, for instance."

While these homegrown solutions are high on customization, they simultaneously lack a number of components (such as real-time online account opening, stronger user authentication and access to shared fraud networks) only core and specialized vendors can provide, Bezard said.

Thus, even in an unstable market, opportunities abound for both large and small vendors, he argued.

The largest--in terms of market share--of current vendors is Fiserv, with just over 40%. The company's 2007 acquisition of CheckFree/Corillian made it an instant player in the online banking sphere. Previously cited homegrown solutions (27%), Sybase's Financial Fusion (13%), Metavante (10%), Fidelity National Information Services (3%) and S1 (3%) round out the overall marketplace on the banking side.

Breaking down the marketplace into individual segments yields interesting data about areas of vendor specialization. Perhaps not surprisingly (based on its nuances), homegrown solutions (at 20% of those surveyed) dominate e-mail and online communications between banks and their customers. However, 13% use Fiserv, 3% Metavante, 3% Premier Global, 3% Kana and 3% West Notifications Group. Half of those surveyed by Aite Group either did not employ such solutions or were not aware of vendor used.

The more niche the technology, the greater the spread in available vendors. Among Bezard's sample, ID verification (during the new account opening process) has nine vendors competing for market share. Equifax, the market leader, owns a 26% share, followed by Fidelity National Information Services at 19%. Other vendors include Lexis-Nexis (10%), RSA (6%), CashEdge (6%), Metavante (3%), BankDetect (3%), Acxiom (3%), First Data (3%) and finally homegrown solutions (3%). Three percent employed multiple solutions, with the remaining 13% yet to adopt online-mobile ID verification.

In contrast, site authenticity product market share tended to reflect that of core banking solutions. Of Aite Group's sample, RSA owns this space with 24%, followed by Fiserv (18%), Metavante (8%), Oracle (6%), homegrown applications (6%), Vasco (3%), Entrust (3%) and finally VeriSign (3%). Thirty percent either did not employ this solution or did not disclose vendor information to Aite.

In the relatively small shared network space, market dynamics mirror that of site authenticity. RSA led the way with a 22% market share, followed by Fiserv (6%), homegrown solutions (3%) and Early Warning (3%). Two thirds of Bezard's sample either do not offer this service or declined to provide this information.

Finally, mobile banking and bill payment--due to their infancy--featured a negligible amount of vendors and solutions.

The sum of the above data is a complex and dynamic online and mobile marketplace featuring a robust array of providers and solutions, Bezard said. To compete, "vendors," he said, "will [need] to expand market share in products and services ancillary to their main online banking front-end and payment processing business."

--mrapport@cutimes.com

Instant Insights /

Time to Expand: Vendors and Applications Aplenty in Online and Mobile Banking

Related Stories

Recommended For You