Middleware, API, messaging layer and other names are used to refer to the ability of a core system to communicate with another system. Typically, the “other system” is a third party product such as an Internet banking application. Now virtually all core vendors have created this capability and have struggled with how to package and price the services. It’s time for the GonzoBanker team to put a stake in the sand and provide a bit of guidance for the vendor community. But first, perhaps a lesson can be learned from the industry’s experience with Internet banking applications.
At the dawn of Internet banking, a small number of vendors produced the first crude software products that linked bank customers directly to their bank accounts. Access to bank account information has been around for a number of years, but the browser and the Internet simplified the process so much that “typical” users (read that as the bulk of everyday users who don’t have a clue how technology actually works) could easily log on and access information about their bank accounts.
More vendors, more applications, vendor consolidation and competitive prices have now driven Internet banking applications to being just another product that banks must have to be competitive in today’s banking arena. Internet banking is so pervasive in the marketplace today that most banks provide it as a free service to their customers. Most importantly for bankers, they discovered that Internet banking products make their customers “stickier” and much less likely to move to a competitor bank. Stickier customers make the cost of Internet banking more palatable to banks.
Metavante Corporation was the first national bank system and service provider to provide a tool set designed to facilitate integration of third party products to its core system. Until this time, interfaces (connections) to a vendor core system were proprietary, closely guarded secrets. Introduction of this product sent shock waves through the industry. Here was a company that openly shared the recipe that allowed other vendors to access, process and store information within the core system. Certainly this event marked the first move to provide “open” access to formerly closed systems.
Today this product is marketed under the name “ConnectWare” and is used by most of Metavante’s existing customers. Metavante, like the Internet banking providers, learned some lessons about pricing products, market maturity and customer satisfaction. An interface to core was a new concept that became a new product. Initial pricing used “click” charges that were noted on the invoice and translated usage into an amount on the invoice. Neither Metavante nor its customer base realized that the modest unit charge would become large dollar amounts as usage grew.
A large portion of volume growth was driven by Internet banking applications. Metavante was late out of the gate with its own Internet Banking application, forcing customers to look to third party products. At the same time, other major vendors were introducing their own interface products and struggling with how to price them. Most of them, like Metavante, considered the new capability to be an “add on” product that was priced as an option. Pricing structures included fixed price, click charges, asset based and volume based.
Customer pressure, good sense and market forces required every vendor to come to the table on pricing their interface products. By the way, these products have many names today, sometimes referred to as an API (automated programming interface), middleware, messaging layer, etc. but the end result is the same – a way for another system to access information from the vendor’s core system.
Personally, I like the ingenuity shown by vendors when choosing the marketing name for their products. Some examples:
For those vendors that have yet to name their product, there are some really good names still available. How about these:
If you would like to use one of my name ideas, send your application to my attention written on the back of a new $10,000 bill to the address noted in the “Contact” pull down menu at the top of your GonzoBanker screen.
Why aren’t these products simply a part of the core system? It seems to me that it is in the best interest of every vendor to encourage their customers to actively use the tool and integrate as many third party products as possible. Why? It will make the bank a stickier customer that is more likely to extend its contract rather than face a conversion and the need to reintegrate all of its third party products and customizations.
A few vendors have seen the light and they now package their integration products with their core systems. In these cases, they simply show the product as included in the product offering. FIS MISER and JHA Silverlake often propose their products in this manner. Customer report that Metavante generally charges a fixed monthly fee to use the product without volume based fees (much to the relief of its customers).
Fiserv clients tell us that CBS continues to price Communicator as a separate product with fees for “message sets” necessary for specific types of interfaces, such an Internet banking. Fees also vary based on the asset size of the bank, i.e., larger banks pay larger fees. Like in the early Metavante days, these charges can grow quite large.
C’mon vendor community, take a look at the math. If your customer, on average, will stay with you for one additional year, the benefits are substantial for both parties. The time has come for the entire banking vendor community to recognize that interface products are simply part of core and should be priced as part of the bundle of products marketed as the core system. It’s like the Gillette razor, give ‘em the interface and encourage them to hook up everything to your core product. They will stay longer and ultimately produce more revenue. Think of the value created as your clients build a huge library of third party interfaces, adding more credibility to your offering.
If you disagree, as noted above, please send your comments to my attention, written on the back of a $10,000 bill to the address noted above.
-caf
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