Internet Banking Vendors: Escaping the Doldrums

Celent Communications examines the winds that will blow away Internet banking vendors’ doldrums: features and functionalities that clearly contribute to ROI. The doldrums should dissipate by 2005 when Celent predicts IT spending will break the US$1 billion mark.

Internet banking has entered into a mature phase, for better and worse. On the plus side, technological improvements have made applications increasingly reliable, scalable, flexible, and customizable, causing bank and consumer satisfaction to steadily increase. However, the flow of RFPs has notably slowed and the competitive field continues to be crowded. In addition, for much of the banking market, a single point-solution is no longer interesting on its own. Consequently, for solution providers to survive, they must adapt to banks’ demands for solutions that extend beyond retail Internet banking.

According to Alenka Grealish, author of the report and manager of the banking group at Celent, "The Internet banking vendors that will escape the doldrums are those whose solutions fulfill banks’ ROI demands, which are extending beyond simple cost-to-serve equations and direct revenue models. Banks’ demands currently include lowering cost-to-serve through self-service features with broad appeal (e.g., check image access and e-statements) and improving customers’ online banking experience through effective support features (e.g., online chat). Behind the customer-facing scene lie additional opportunities to lower costs. For large banks, a payment warehouse offers a means to defray the cost of offering online bill payment. For all banks, consolidation of applications across businesses and channels onto a single platform holds promise."

The report profiles and grades eleven vendors along three dimensions: financial viability, self-service features, and customer support features. Table 1 displays the vendors earning an "A" grade.