Yodlee Inc. is revising its personal financial management products to help smaller banks offer customized services and better compete against larger rivals.
Financial management tools are becoming more common on Web banking sites, but smaller banks have smaller budgets and fewer options when it comes to buying them.
Yodlee, a Redwood City, Calif., company, developed its PFM tools for big banks and only sells directly to 200 of the largest U.S. financial companies; last year it struck deals enabling S1 Corp. and CBG Holdings Inc.'s Q2 Software Inc. to resell its products to smaller banks as part of their own online banking software.
However, it is those partners — not the banks they target — that decide which features of Yodlee's software to integrate into their products, an approach that means banks cannot request specific capabilities that might especially appeal to their customers.
First Bank, a Troy, N.C., unit of First Bancorp, which has used Yodlee's software through both the S1 system and Q2's (it switched to the latter in April), said that banks do not want a one-size-fits-all product.
"Nobody wants to be a me-too," said Cathy Dudley, a senior vice president at First Bank.
But Dudley said her $3.5 billion-asset company's budget gives her little choice. "Banks the size of First Bank and under, we're going to have to go toward buying something off the shelf," she said.
Joe Polverari, Yodlee's senior vice president of strategy and development, said that it offers the same version of its financial management software to both large and small banks. But "if you're a smaller bank, you can't configure exactly as you would a larger bank," he said. The vendors Yodlee sells through "sort of have to pick what they think the best mix of features and functions is" for their clients.
Yodlee is still in "version one" of its small-bank strategy, he said, and is revising its software so its online banking partners need not filter out features their small-bank clients may want.
Dudley said First Bank was pleased enough with Yodlee's software that it chose to upgrade it as part of First's transition to Q2. "We really want to try to have the same kind of products that our customers would expect from larger banks," she said. On S1, the banking company used a more basic version of Yodlee's software, which did account aggregation but lacked the tools to analyze the added financial data.
Her main gripe is that the PFM software is not presented as a seamless part of the online banking experience.
First Bank is not yet promoting it, but many customers have found it on their own. This speaks to the appeal of the product, she said, but enrollment would be even higher if the features were more visible.
"Customers don't want to go there and click and click and click" to get to the tools, she said.
Polverari said that Yodlee plans to introduce an updated version of the software within three months and that it should let small banks better customize the product.
Ultimately, Yodlee wants to put customization in the hands of the end user, so individuals decide which features to include and which to omit. Bank-level customization will come first, he said.
"What you'll be able to do tomorrow is really sort of leave it more up to the individual bank, whatever the size, to pick and choose what's represented in their PFM solution," he said.
Though most of Yodlee's current customers are the large banks it targets directly, Polverari said it is putting more deals in place to reach small banks and expects to announce reselling relationships with two more online banking vendors this year.
Mark Schwanhausser, a research analyst at Javelin Strategy and Research, said that Yodlee's partner strategy is on the right track.
"These kinds of relationships make sense for a company like Yodlee because their main focus has been on the large banks initially and they don't have time to go out and knock on the doors of hundreds of smaller banks," he said.
However, First Bank's concerns are valid, Schwanhausser said, because a lack of customization could hurt what is otherwise an in-demand product.
"Putting a new logo on is not quite what I have in mind when I think of customization," he said. "If you've got only a partial PFM product, then you have the potential for a complete disappointment."
Banks that offer financial management tools are not trying to appeal to users of desktop software like Intuit Inc.'s Quicken or Microsoft Corp.'s Money (which is being discontinued), he said. Instead, they want to appeal to the people who are not willing to spend hours staring at spreadsheets.
For this crowd, it is important to make the offering as foolproof as possible, Schwanhausser said. Hiding features behind tabs may prevent their discovery.
"With a partial product, you have a lower possibility of pleasing those … who practically have to stub their toe on it" to find it, he said.
Marc DeCastro, a research manager at IDC Financial Insights in Framingham, Mass., said the problem may run deeper than simply moving the switches that determine which features go where.
"There's a functional as well as an operational aspect of this," he said, and the operational aspect — how the PFM software hooks into the online banking software — still must work.
Another problem is that some banks resist letting their data be harvested for use in aggregation or PFM tools, he said.
That said, Microsoft's recent decision to abandon Money, its own PFM product, means some people will be looking for a new product to manage their finances.
"We're still in the infancy stages of trying to turn that into a Web front end," DeCastro said, but "I do think there's a desire."
