Business Signatures Corp. is hoping to shake up the antifraud software market by undercutting competitors on price.
The Redwood City, Calif., vendor, is charging a flat annual fee of $48,000 for the basic authentication product that it expects to introduce this week. Peter Relan, the vendor’s chairman and chief executive and a co-founder, said the product is similar to his rivals’ but much less expensive, because many other companies charge a per-user price.
“We just want to knock out this per-account model, because it’s stifling the industry,” he said.
Observers say Business Signatures’ decision indicates that the companies offering similar products will have to start differentiating themselves by price.
George Tubin, a senior analyst at TowerGroup Inc., a Needham, Mass., unit of MasterCard International, said most vendors charge about $1 a user each year, though large customers often get volume discounts.
Business Signatures has set “an extremely low price,” and if its product is comparable to other companies’ software, it “could have a major impact” on the industry, he said. “It will put pressure on other vendors.”
Last week Business Signatures announced that H&R Block Inc. of Kansas City, Mo., would begin using its authentication software next month. Marc West, the tax preparation company’s chief information officer, said the price is “pretty attractive” and was an important factor in the decision to use the software.
However, he also said that his main concern was whether the software could effectively protect his customers’ accounts. “It’s performance-for-price, not necessarily price-for-performance.”
About a year ago H&R Block’s small-business services unit started using Business Signatures’ more expensive Real-Time e-Fraud Detector, which raises red flags if a customer’s online session does not match customers’ typical habits. H&R Block is about to roll out that software in its advisory and tax business, Mr. West said.
The authentication software looks at customers’ computers and network connections when they try to log in to a financial company’s Web site. If it does not recognize a computer, it can require additional authentication procedures, such as asking challenge questions, phoning the customer, or sending them a text message. The software also displays a pre-selected phrase to prove to the customer that the bank site is legitimate.
Mr. Relan said other vendors use these ideas.
For example, PassMark Security Inc., which is also based in Redwood City, displays a user-selected image to verify that a bank’s site is real, and it puts a file on the user’s computer to confirm the user’s identity. It also looks at other hardware settings. Users who want to access the site from a machine that does not have the file can answer challenge questions to authenticate themselves.
Mark Goines, PassMark’s chief marketing officer, said his software is more powerful than Business Signatures’ new product, because his software can also prompt banks to ask for additional authentication if a customer initiates a high-risk transaction.
He said PassMark charges $1 a user each year, with a $50,000 minimum, though high-volume customers get a lower rate.
“The reason we have dynamic pricing is we have a dynamic product that changes frequently,” Mr. Goines said.
Mr. Relan said that his authentication software was designed to comply with the Federal Financial Institutions Examination Council’s recommendations in October that financial companies strengthen their security for remote banking transactions. Most banks are now interested in authentication measures that use more than just the basic user name and password, he said.
Setting the price so low “removes all barriers” to complying with the guidelines and “lets people move on to the next step” in improving their online banking security, he said.
Mr. Relan also said he hopes to attract customers with the low-cost authentication software and then persuade them to also use the more powerful Real-Time e-Fraud Detector. The minimum licensing fee for that software is $200,000.
The authentication software is available alone and is profitable even at the low price, he said.
Cyota Inc., a unit of RSA Security Inc. of Bedford, Mass., has a basic software product, eStamp, that checks users’ machines when they log in to a Web site to make sure they are using a known computer.
It charges 8 to 10 cents a customer each year but is offered free to customers that use Cyota’s more powerful eSphinx, which monitors hardware, network settings, and transactions initiated during an online banking session. If eSphinx determines that a transaction is suspicious, the bank can telephone the customer for identity confirmation.
Naftali Bennett, Cyota’s chief executive, said he charges $1 a customer each year for eSphinx, with a minimum payment of “several thousand dollars a month.”
For security software, pricing is less important than capabilities, he said. “I don’t believe a vendor coming in at a lower price point will make a difference.”
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., said Business Signatures’ low-priced product “is not going to eliminate your fraud.” However, “if you’re one of these average banks or anything below the top tier, and you need to be FFIEC-compliant and move beyond passwords, this exactly hits the mark.”
The low-price product will pressure other companies and could push down prices for similar products by about 30%, Ms. Litan predicted.
“It’s a really smart move, because the big dollars are going to be made selling to the smaller banks” that may not be able to afford a six-figure price tag for basic compliance, she said.
Mr. Tubin agreed that Business Signatures could spark a price war, but he said that its main product is still a high-ticket item. “This pricing is not for their entire solution set; it’s only for the introductory part of it.”
