Royal Bank of Canada has joined a string of banks that, though they are part owners of S1 Corp., have given key contracts to S1 rivals.

Though it holds a 25% stake in S1 Corp., a provider of Internet banking software, the Toronto bank has hired Magnet Communications to set up a corporate Internet banking service for business customers.

Royal uses S1's products and services to operate its Internet banking service for retail customers. But Magnet, based in S1's hometown of Atlanta, has more experience in corporate banking software, industry experts said.

Brian McArthur, vice president of cash management at Royal Bank, said Magnet is the "best in its class." However, Royal's relationship with S1 "is still important and critical" on the retail end, Mr. McArthur said.

Under the agreement with Magnet, Royal Bank's business clients will have access to Magnet's iBank products, which facilitate online funds transfer, balance reporting, money market investments, and file transfers.

Royal Bank expects to begin testing the software this summer and to offer it to its more than 400,000 business clients in early 2001, Mr. McArthur said.

Scott Appleby, senior electronic finance analyst at Robertson Stephens, the investment banking division of FleetBoston Financial Corp., said S1 is new to corporate Internet banking, so it made sense for Royal Bank to choose a different vendor. S1 began offering corporate Internet banking after it purchased FICS Group, a Belgian corporate banking software provider, last June.

"FICS has been geared more toward the European market, which has a very different system," Mr. Appleby said. "It's still early for them."

Stephen C. Franco, an analyst with U.S. Bancorp Piper Jaffray, said, "S1 is still in the process of trying to integrate all of these products and it is inevitable that a few customers are going to look elsewhere." But considering Royal Bank's close relationship with S1, he said, "it's a loss they shouldn't have seen."

This is not the first time an S1 investor has turned to an S1 competitor for Internet banking services. In February, Wachovia Corp. announced it would use Web software from S1 rival Corillian Corp. in addition to S1's software. Citigroup Inc., another investor in S1, announced last month that it would do the same.

Wachovia and Citigroup are both using Corillian's Open Financial Exchange technology to broaden their retail banking platforms. OFX is a data-exchange specification that standardizes transactions such as paying bills, transferring balances, and getting statements.

With Corillian's OFX-certified Voyager server, Wachovia and Citigroup can let their customers conduct OFX transactions using Intuit's Quicken, Microsoft's Money, and other popular financial management programs.

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