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(COMTEX) B: MORE BIG-DOLLAR VENDOR DEALS EXPECTED IN 2000
B: MORE BIG-DOLLAR VENDOR DEALS EXPECTED IN 2000
Dec. 08, 1999 (CORPORATE EFT REPORT, Vol. 19, No. 24 via COMTEX) --
Industry Leaders Linking Large Corporate Systems To Retail Products
A bonanza of mergers and acquisitions among providers of electronic
banking software has left the industry noticeably altered at the close
of 1999, and has banks and treasurers alike wondering what will come
next.
The consensus: Expect more of the same in 2000, but with larger dollar
signs attached to the deals, say several vendors. Additional
consolidation is needed in the emerging Internet-led industry, despite
all the activity of the past year, they believe.
For many cash managers, the merger trend likely will mean their new Web
banking software will be an offshoot of, or tied to, a retail- based
banking platform.
Retail and large corporate systems "are clearly different market spaces,
" whose users require different levels of functionality, says Fred
Dumas, president of Charlotte, N.C.-based cash management vendor FICS
America [SONE].
But banks "want to see the convergence of technology [between markets],
so they can have less infrastructure to support all these channels and
different market segments," Dumas says.
Portals Becoming Buzzword
FICS was part of one of 1999's blockbuster deals. The company was
acquired in May by Internet banking pioneer Security First of Atlanta,
along with Edify Corp., which is focused more on the retail banking
market (CORP, May 26).
The objective of the consolidated S1 is the creation of a "financial
portal" for banks. This goal was enhanced, officials believe, by the
additional purchase in September of Atlanta-based VerticalOne Corp., a
consolidator of personal account information via the Internet.
"What VerticalOne does that is great for the cash management division
is it gives you a single sign-on capability," Dumas says. "You can log
on to a system once, and it will go out to all the Web sites [cataloged
by you], grab the data, consolidate it for you, and give you a
multi-bank view for all your cash, your debts, all your investments."
"It would be offered through the banks for large corporates, or it
could even be for a small business who wants to have sign-ons to a
bunch of different Web sites," Dumas says.
"There's a lot of synergy in bringing together VerticalOne and the
retail content [of Edify], and plugging that into the FICS engine to
deliver the financial portal model directly to cash managers," says
Jeff Ayton, S1 senior vice president.
Other Vendors Following S1 Lead
S1 competitors have taken notice of the company's purchasing
strategy, and have similar plans, albeit in sometimes smaller deals.
"There will be additional consolidation [in 2000], either through
mergers or acquisitions," says David Luther, vice president of
marketing and business development for Brokat Financial Systems, an
Atlanta-based electronic banking vendor.
"I really think that some of the boundaries between corporate, retail
and insurance [products are disappearing]," Luther says. "This is
going to cause the S1 [portal] model to be more prevalent, I think. It
is the same model we have."
Brokat, with a strong retail banking base in Europe, entered the U.S.
large bank and large corporate market in 1999 with the May acquisition
of Transaction Software Technologies. However, the company sees the
small business area as one ripe for growth.
"Small businesses will want to have a blend of retail and corporate
[functionality]," Luther says. "You have to [offer] credit card
transactions online, EBPP, wires, tax payments and [automated clearing
house payments]. We think that is a logical step for us to blend what
we've done in the retail space with what we've done in the corporate
space, and come up with a small business [solution]."
Small Bank Product Prices Surging
Entry into the large-bank corporate cash management business, by way
of an acquisition, has been a relatively inexpensive proposition in
1999. Integrated Cash Management Services, TST and the related
business of Sterling Commerce [SE] were snapped up at affordable prices
during the year.
Meanwhile, small-bank product prices have gone through the roof, topped
off by last month's merger of Digital Insight [DGIN] and nFront [NFNT]
(CORP, Nov. 24). That deal puts a $439 million equity price tag on
Atlanta-based nFront - the smaller of the two merging firms.
"The problem is that they're expensive," Brokat's Luther says. "For a
while we considered buying an online retail banking [company] in the
U.S., but the hot IPO market has caused the prices to be very high.
When you go in and talk to them about acquiring [the company], it's
really hard to justify spending that kind of money on someone with $2
million in sales."
Consolidation Vs. Expansion
Total worldwide spending on Internet-based delivery systems by banks
for corporate clients is expected to reach $1.4 billion annually by
2003, according to Newton, Mass.-based consultancy Meridien Research.
With such a large amount of money riding on banks' near-term decisions,
a trend to watch in 2000 is whether vendors will move to consolidate a
single segment of the online bank market - like Digital Insight/nFront
in the small-bank area - or try to grab substantial parts of multiple,
vertical bank market segments - such as S1.
Taking the latter approach is Emeryville, Calif.-based software firm
Sybase [SYBS], which just this month announced a merger with Home
Financial Network, a Westport, Conn.-based Internet financial services
company (see "Sybase To Acquire HFN").
The competitive landscape among vendors could be about to change, says
Randi Purchia, research director for Meridien. "One of the things we
know is that when we look at larger banks, there aren't so many of them
worldwide, so [competitors will need to] focus on some of the smaller
financial institutions," Purchia says. "HFN and S1 might look to
compete in [the small bank market], and may have thought about even
getting down to Digital Insight's [market] space."
"We really don't run into Security First hardly at all competitively
today," says John Dorman, president and CEO of Calabasas, Calif.-based
Digital Insight. "They are focused almost exclusively on the top 50
institutions, and we're focused almost exclusively on the 22,000
[banks] below the top 50."
Among all Internet banking software providers, "you probably will see
three or four leaders emerging with a really significant market share
over the next 18 to 24 months," Purchia says. "It will be those
institutions that have an extensive sales force, and the integration
capabilities banks are looking for, at least on the big bank side."
(Jeff Ayton, S1, 404/812-6524; John Dorman, Digital Insight, 818/871-
0000; Fred Dumas, FICS, 704/423-0394; David Luther, Brokat, 770/261-
8088; Randi Purchia, Meridien, 617/796-2800.)
CORPORATE EFT REPORT'S TOP 10 ELECTRONIC BANKING DEALS OF 1999
(In Chronological Order)
Company: Electronic Banking Unit of Automatic Data Processing
(Roseland, N.J.)
Acquired By/Merged With: M&I Data Services (Milwaukee)
How much?: $67.1 million
When: February (CORP, March 3)
Company: FICS Group (Brussels, Belgium)
Acquired By/Merged With: Security First Technologies (Atlanta)
How much?: $1.08 billion
When: May (CORP, May, 26)
Company: Edify Corp. (Santa Clara, Calif.)
Acquired By/Merged With: Security First Technologies
How much?: $345 million
When: May (CORP, May 26)
Company: Transaction Software Tech. (Atlanta)
Acquired By/Merged With: Brokat Infosystems (Stuttgart, Germany)
How much?: $18.7 million
When: May (CORP, May 26)
Company: J. Driscoll & Associates (Dallas)
Acquired By/Merged With: Globeset, Inc. (Austin, Texas)
How much?: undisclosed
When: September (CORP, Sept. 15)
Company: VerticalOne (Atlanta)
Acquired By/Merged With: Security First Technologies
How much?: $166 million
When: October (CORP, Dec. 8.)
Company: Commerce:Banker Product Line OfSterling Commerce
(Dallas)
Acquired By/Merged With: Fundtech (Jersey City, N.J.)
How much?: $4.4 million
When: October (CORP, Oct. 13)
Company: Integrated Cash Management (Great Neck, N.Y.)
Acquired By/Merged With: Bottomline Technologies (Portsmouth,
N.H.)
How much?: $8.5 million
When: October (CORP, Nov. 10)
Company: nFront (Atlanta)
Acquired By/Merged With: Digital Insight (Calabasas, Calif.)
How much?: stock transaction
When: November (CORP, Nov. 24)
Company: Home Financial Network (Westport, Conn.)
Acquired By/Merged With: Sybase (Emeryville, Calif.)
How much?: HFN valued at $130 mil.
When: December (CORP, Dec. 8)
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Copyright Phillips Publishing, Inc.
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