An Open Letter to Internet Banking Providers

Dear Corillian, Financial Fusion, S1, Digital Insight,
Online Resources, Netzee, et al.:

I have enjoyed watching the conception, birth, growth and maturation of your companies. But as satisfying as this experience has been, I hope I won’t soon be reading your obituaries in the Wall Street Journal or American Banker.

You are probably asking yourself why a rational person would forecast the death of a dot com survivor. In truth, I never entertained the possibility until I met recently with senior banking technology executives from 22 banks between $2 billion and $16 billion in assets, most of which have been clients for nearly 10 years.

This bright, rational, effective, and cost conscious group of executives was discussing the issues they have with their Internet banking vendors. And what they revealed in our meeting simply stunned me.

They reported the following:

• Their current Internet product (usually retail, occasionally business) was at least their second product and in several cases, their fourth, most often caused by the vendor’s acquisition followed by a sunsetting of their existing Internet product. The not surprising consensus? Bank customers are a little tired of these frequent changes.
• When buying Internet banking services by the drink, the successful bank’s monthly costs exceeded its bill for core systems. Hey Internet banking vendors, can you help me understand why it should cost more to process an Internet account than it costs to post all those pesky debits and credits to a deposit and loan account?
• All of the vendor products provide more functionality than these banks need. Complexity of products contributed to higher initial costs and long term support difficulties.
• Vendors’ ability to support their products sucks, big time. Fast growth has contributed to under-skilled teams being assigned to implement and support products.
• Last but not least, little confidence exists that most (and in some cases any) vendors will survive their string of financial losses. How many times can you believe “next quarter we expect to become cash positive…”?

Sure, these comments are easy to write off as whining by a small number of unhappy customers. Perhaps, but what stunned me about these discussions was not the revelation of the issues but the banks’ envisioned solution: to develop their own Internet products!

Several of the banks have already deployed custom solutions. They reported these results:

• Bank executive management welcomed a solution to ever increasing Internet banking costs.
• Vendor core systems increasing openness simplified integration issues.
• Strong Web development tools have greatly simplified building smashing and powerful products.
• Middleware tools, mostly XML, simplified development.
• Business cases showed rapid pay back, in some cases less than a year.

These rational individuals with a history of using packaged products are now going down the development path. Although it was a minority that reported having actually developed a product, I know the idea resonated in the group by the plentiful note-taking and the break time conversations. My long-term concern is that we are ignoring the nightmares custom development caused during the Y2K experience.

For Digital Insight, Financial Fusion, Corillian, S1, to name a few, let me end with a few thoughts.

• Maybe your biggest threat isn’t that “other” Internet banking provider, it’s your own customer.
• Maybe investing in your own staff will yield better returns than the next acquisition.
• Maybe your pricing structure needs to be examined.
• Maybe a rock solid, simpler product is better than the bunch of “whiz bang geegaws” in your next release.
• Maybe the quick sunsetting of the product just acquired should be delayed.

Perhaps I’m all wet about this, but the group I met with was dead serious. It just seems strange to me that a few months’ development time will produce an acceptable product and you, the vendors, have failed to produce a better product after thousands of staff months of effort.

Good luck in the future. I think you are going to need it.
-caf