Sanchez Computer Associates Inc., which provides technology to two of the nation's most ambitious Internet banking ventures, has introduced a pricing system that sacrifices short-term gains to long-term benefits.

Banks that use its Profile/Anyware software for Internet banking will now be charged a monthly fee of $3 to $16 per Internet banking customer, instead of paying substantial up-front licensing fees.

The new pricing structure will help banks jump-start Internet banking. Sanchez said demand is strong enough to allow it to make the change.

The Malvern, Pa.-based company provides core banking software and outsourcing services. But officials said the company will devote all of its sales, marketing, development, and implementation resources to banks' interested in Internet banking, instead of those just looking to replace legacy core banking systems.

"We are pinning our tails to the e-commerce donkey," said Frank R. Sanchez, chief executive officer, during a conference call to discuss third-quarter financial results.

"We believe we are in a demand market and are in a position to take a very large share of that market," he added. "We need to allocate substantially all of our resources towards that."

Richard Jacobs, an analyst at Janney Montgomery Scott Inc. of Philadelphia, said, "This is a wrenching change in strategy -- abrupt, almost." But the company must respond to the growing domestic demand for Internet banking services, he said.

In June, Sanchez was named the outsourcing provider to, Bank One Corp.'s direct bank initiative. Citigroup Inc.'s Citi f/I, which opened the following month, runs Sanchez software in-house.

These two customers represent 150 million consumer accounts, Sanchez said. Company officials said they expect to sign contracts with six more customers representing an additional 100 million accounts. These new customers -- names were not disclosed -- would pay according to the new pricing structure.

Mr. Jacobs applauded the change, saying that some very large banks might prefer paying an up-front licensing fee, but most others would balk at committing a substantial amount of capital right at the start.

"I interpret this as a significant strategic move that will have very positive effects over the intermediate and long term," Mr. Jacobs said. "Its initial financial impact (on Sanchez) in terms of reported results will obviously be negative."

Sanchez reported third-quarter revenues of $17.5 million, up 44% from the same period a year earlier. Net income was $2.6 million, up 24%. Revenue from the E-Profile outsourcing unit was $3.3 million, up 153% from the second quarter. The unit did not exist a year earlier.

Sanchez' stock price fell $2.25 in the week, to $26.125 a share.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.