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October 28
Consumer demand for more robust Internet tools is helping push forward banks' technology investments, Fiserv Inc.'s chief executive said last week.
U.S. Bancorp is illustrating the point in choosing to install the Brookfield, Wis., technology vendor's Corillian Online system to deliver Internet banking, bill payment and personal financial management tools to customers, Jeffery Yabuki said during an earnings conference call.
"This is another proof point supporting what we believe is the early stage of a global renewal of the online banking channel," Yabuki said.
Many large banks run their online banking channel using proprietary systems they built internally. That U.S. Bancorp is upgrading its system reinforces the idea that Internet banking has evolved from being an ancillary service to a "primary customer touch point," said Nicole Sturgill, a research director for delivery channels at TowerGroup in Needham, Mass.
"People just don't need to go to the branch," Sturgill said. "Because of that, banks have to make that channel a complete, robust channel." U.S. Bancorp would not comment on its plans.
The $291 billion-asset banking company, which already uses Fiserv's bill payment technology, is among a handful of large U.S. banks in the process of "re-upgrading their online experience." This is not surprising because many banks have not made heavy investments in the channel since the early 2000s, Yabuki said.
"It's just about time to remodel that experience, given everything that's going on today," he said.
Banks are under pressure from new regulations, making the desire to promote lower-cost channels like the Internet more important, experts said. Doing so could result in "efficiency gains that will be driven by moving customers there as opposed to some of the more expensive ways of interacting with clients," Yabuki said.
In general, more banks are starting to invest again in technology after retrenching because of the financial crisis and uncertainty over the effect of new regulations, analysts said.
Fiserv said Tuesday that its revenue in the quarter ended Sept. 30 rose 3.3% from a year earlier, to $1.03 billion.
The Jacksonville, Fla., vendor Fidelity National Information Services Inc. also on Tuesday reported a 3.3% increase in adjusted revenue, to $1.29 billion. This included results from Metavante Technologies Inc., which FIS bought in October 2009.
Both companies said better clarity about financial regulations has helped banks grow more confident in their spending decisions, though concern persists.
Yabuki said Fiserv is having more talks with banks about new products but that clients are slow to actually make a purchase decision.
"The urgency is more around the focus of the products that they want to bring in, but there's little urgency for people to pull the trigger on anything on any given day," he said.
Fiserv, FIS and Jack Henry & Associates Inc., which has primarily focused on selling core processing systems to banks, have more recently been pushing new online and mobile services.
John Kraft, a senior research analyst who follows Fiserv for D.A. Davidson & Co., said banks are interested in new technology areas as a way to recover fee revenue lost to regulations as well as to attract and retain customers.
"They want to pick up share, and one of the ways you can pick up new customers is by having a better online mousetrap," Kraft said.
Though charging fees for some new technology services, such as mobile banking, is not likely to happen, having advanced services in such areas may make it easier for a financial institution to justify charges for other traditional bank products, he said.
"It creates value, and it creates loyalty," Kraft said. "If you have all these bells and whistles, maybe it [better] enables you to charge for your checking account."
Fiserv does expect its clients to charge their end-customers for using the vendor's ZashPay person-to-person payments system, Yabuki said.
The PayPal competitor service, which Fiserv introduced this year, lets users send money to other people using the recipient's mobile phone number or e-mail address. More than 400 banks have agreed to offer it, and Yabuki said he expects many to charge a per-transaction fee. Research the company has done shows "there's very little consumer resistance to reasonable pricing" for the service, he said.
