eFinance: Notes from the Robertson Stephens Conference
10-Feb-00 01:17 ET
[BRIEFING.COM - Robert V. Green] The Robertson Stephens eFinance Conference was held earlier this week at the Pierre Hotel in New York. Here are some "big-picture" observations gleamed from the conference.
Not Just Stock Trades
The online investing revolution started the eFinance movement, but it is already clear that it is only the tip of the iceberg. In just a few years, new services, some of which are listed below, will totally change the way you buy, and the way you pay.
Transactions Are Commodities
The immediately obvious message from online brokerage firms is that transactions are commodities. Differentiation between brokerages is fairly clearly set, now, and will be hard to change over time. Firms are focused on customer acqusition, on the theory that once obtained, customers rarely switch.
Advice Is Coming
Automated investment advice is right around the corner.
There are several firms working on providing automated advice for investors in 401(k) firms. The business models vary, but it is clear that automated advice will become available, as a service offering to you.
TeamVest and Financial Engines both presented at the conference. Both are private. (A third firm, mPower, previously called 401(k) Forum, is also in this space, but was not at the conference.)
Financial Engines has raised $125 million (first reaction: what does the business plan projection show to justify this amount?). Financial Engines sells directly to individuals, to plan sponsors (companies) and plan providers (mutual fund companies, etc.) Services to individuals are $15 per quarter. Prices to plan sponsors and providers vary, and little guidance was given as to the standard fee structure there.
TeamVest, on the other hand, offers free advice on 401(k) plans. The top 600 plans in the company are already available on their web site. TeamVest uses the free service as a way to draw traffic to their higher level services, which offer planning and investment advice for a fee. However, TeamVest's model uses humans to deliver the pay-per-advice sessions, which removes scalability from their model.
While it is clear that advice will be coming, investment opportunities look bleak. TeamVest, with no scalable model, may turn out to ruin Financial Engines model, if TeamVest's product is decent.
Institutional Infrastructure Is Being Built
There is a huge existing current financial infrastructure for check clearing, fund transfer, credit card verification and posting, bank transfers and settlements, and wire transfers.
Nearly all of this infrastructure is based on legacy systems, with a tremendous amount of human intervention. The internet, as an enabling technology, can make many large financial institutions much more efficient.
The movement of existing financial systems to the internet will be slow, but it is inevitable.
There were several interesting companies at the eFinance conference that are helping to build this new infrastructure. As technology platform companies, most have software business models, not internet business models, but they may be of interest to some Briefing.com readers.
S1 Technologies (SONE): The first internet bank, previously known as Security First Network Bank (SFNB), was sold to the Royal Bank of Canada, but the technology division was spun off as S1. Now, S1 is a B2B technology company, selling internet enabling technology to financial institutions.
Bottomline Technologies (EPAY): Originally a developer of software for processing paper-checks, Bottomline now also sells ePayments software, primarily to commercial enterprises, not financial institutions, for electronic payment transactions. With an installed base of more than 2,000 customers, Bottomline has a "first crack" opportunity at many corporations as they move to electronic payments.
FundTech (FNDT): A small player in the electronic payment space, FundTech sells NT based software for electronic cash settlement and and fund transfers. These functions are not actually performed over the internet, currently, but on existing proprietary bank systems. Nevertheless, because FundTech's software automates a currently labor intensive process, they are helping bring the eFinance world closer.
Complete Personal Financial Programs
As all of the underlying infrastructure for internet transactions is being built, the "top" layer is also being developed. This is the interface you will use to receive bills (bill presentment), and pay bills (bill payment).
There were two companies at the conference presenting on this area: OnMoney.com (private) and Intuit (INTU).
OnMoney.com is a single site for bill payment and presentation. The goal is to be a trusted advisor, and wrap up all financial statements and bills in a single site. The "wrap-up" portion of their product is free, but the "trusted advisor" portion of their site is their revenue model.
OnMoney.com's revenue model is based on ecommerce of financial products: selection of insurance, mortgage, etc. OnMoney is a mall of products, not a manufacturer of products. The "advisor" portion of their site helps a user select product. Whether this will be perceived as a conflict of interest is unclear.
Intuit's MyAccounts.com: A new service, which was not demonstrated, but is being rolled out this quarter. In a nutshell, it is Quicken on the Web. It may, in fact, be the "Quicken-killer" application, and if so, it only shows how nimble Intuit really is.
MyAccounts.com will be a single site where you can receive bills and pay bills. MyAccounts.com allows bill providers to present their bill, their way, rather than modified for MyAccounts.com, or presented by MyAccounts.com.
Reports on bill payments include the details of the original statement. Payments are handled directly over the net, by contract with Checkfree. MyAccounts.com also allows you to receive bills from providers who are not able to present bills electronically, by contracting with an outside service called Cyberbills (private). Cyberbills receives your postal bills, opens them, scans them, then sends them to you electronically.
Frankly, OnMoney.com needs to show a competitive reason why they will be attract customers over Intuit. The free aspect of their bill payment/presentment may not be enough. However, OnMoney.com is still in its infancy and may change their offering over time. Nevertheless, when viewed next to Intuit, OnMoney.com faces a steep uphill climb.
Summary
The eFinance revolution is just beginning. A new $300 million "incubator" for eFinance startups was even announced, called efinanceworks.com, even though no companies are currently in the portfolio. But there will be.
Eventually, a completely automated system for purchasing and paying for goods and services will be available. Once it is, your entire financial life can be "captured" as it occurs. At that point, automated analysis of your financial life becomes possible.
Although not yet on the scene, personal supply chain and efficiency algorithms then become possible. All of this will be here very soon, as the internet cost efficiencies, combined with consumer acceptance, will make adoption quick.
Just what you need. Your computer telling you spend too much on donuts.
Comments can be emailed to the author, Robert V. Green, at rvgreen@briefing.com.
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