Strong interest in anti-fraud measures and online bill payment software helped drive third-quarter revenue for Online Resources Corp. and Corillian Corp., both of which reported solid earnings this week.
Online Resources, which provides outsourced online banking services and related technology, mostly to small and midsize banks, said Wednesday that its Internet banking service grew slightly but its bill payment service is booming.
Matthew P. Lawlor, the chairman and chief executive of the of McLean, Va., company, said in a phone interview Thursday that online bill payment is moving from the early-adopter to the mass-market phase.
The number of online bill payment users it serves through client banks jumped 49% from a year earlier, to 728,000, but users of its online banking services grew just 11%, to 463,000. (Some banks buy online bill pay but not online banking from company.)
Mr. Lawlor said the two numbers overlap, and the total number of users is up 34%, to just over 1 million.
Online Resources said revenue climbed 19%, to $11 million, but net income soared 477%, to $2.1 million, or 11 cents a share.
Banks are encouraging customers to use online bill payment because it makes them more valuable customers, Mr. Lawlor said. "Our clients are now much more aggressively pricing bill payment services - they're making it free," he quipped.
The company processed 9.6 million bill payment transactions in the quarter, 37% more than a year earlier, and 23.4 million banking transactions, a 13%, increase.
Gwenn Bezard, a senior analyst for the Boston market research firm Celent Communications LLC, said Online Resources may be benefiting indirectly from big banks' marketing muscle.
"When Bank of America markets online bill pay, all of the other banks see an uptick in adoption," Mr. Bezard said.
Online Resources also announced Monday that it will buy Incurrent Solutions Inc. of Parsippany, N.J., a provider of online credit card billing and payments. The deal is expected to close in December.
Corillian, of Portland, Ore., focuses on online banking software and targets large and midsize banks. It said Wednesday that it is capturing business from rivals, and that its anti-fraud software is a factor.
"The relatively poor execution of our competitors continues to generate new opportunities," said Alex Hart, its president and chief executive, in a conference call with analysts.
Corillian reported third-quarter net income of $3.1 million (8 cents a share), 86% more than a year earlier. Revenue rose 17%, to $13.5 million.
Mr. Hart said Corillian Fraud Detection System, which was introduced in July but had already been offered to online banking customers for a year, has generated "tremendous excitement."
The service is designed to combat "phishing" attacks - realistic-looking fake e-mails and Web sites that trick banking customers into revealing their account details and passwords. Phishing is a relatively new online scam, but in the past year it has become an especially pernicious problem for banks, which are generally among the top targets.
Most competing services monitor e-mails and Internet directories for new attacks, but Corillian's is meant to detect would-be phishers when they try to copy a bank's site. The company says the service can also tell when phishers link their fake sites to a bank's, a common practice.
Mr. Hart said Corillian can warn banks "eight days in advance of an actual phishing attack."
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., said Corillian's product came at the right time.
"Banks are definitely giving this a much higher priority than they used to," she said. Corillian is "the only company I know that is tracking what's happening to the bank's Web site. It's a pretty good idea."
George Tubin, a senior analyst at TowerGroup Inc. of Needham, Mass., a MasterCard unit, also praised Corillian's strategy. "When you analyze a Web log about what information is going in and what information is coming out, there's a lot of rich information," he said.
