Amid a maturing market for online banking technology, some leading vendors are taking steps that could have them competing more directly for customers.
In the past the major players seemed content to focus on markets in which they dominated - some hosting services for small institutions and others focusing on licensing systems to large ones.
Lately, however, there have been indications that the old boundaries are giving way, and though some executives downplay the idea that a battle for market share is about to erupt, observers consider that outcome all but inevitable.
Corillian Corp., the Hillsboro, Ore., vendor that has long focused on large banks, said Tuesday that it will offer a version of its online banking software to credit unions.
Along with making various tweaks to the technology, the company has started using a new pricing structure meant to appeal to small financial companies. It has shifted from a licensing model, which is generally favored by large customers, to a hosted, per-user pricing model, which is more popular with small clients.
That shift is almost the exact inverse of what Online Resources Corp. announced last week. The McLean, Va., vendor, which typically has used the hosted software model to sell its products to community banks and credit unions, now is offering a version that large customers can use in-house.
Matthew P. Lawlor, Online Resources' chairman and chief executive, said the two companies are not likely to go head to head anytime soon. "Where we're going is the lower-mid instead of upper-mid. Maybe we'll collide, but I don't think so."
However, analysts agreed that there are few untapped sales opportunities remaining, and that online banking software vendors are starting to covet one another's customer lists.
"Most of the vendors have a very specific niche in which they play," but now "the market is fairly permeated" for both Corillian and Online Resources, said John Kraft, an analyst with D.A. Davidson & Co.
To grow, the companies will have to pursue their competitors' customers, he said. "At this point, you're kind of going after competitive takeaways. The land grab is largely over."
Alenka Grealish, who manages the banking group at the Boston market research firm Celent LLC, said that online banking vendors are seeking out new markets because sales have been slowing in many of their current ones.
"It's all in the revenue numbers," she said. "What do you do when revenue growth has stalled? You have to explore other market opportunities."
Mr. Lawlor said offering an in-house product "is an opportunity for us to expand our market."
As Online Resources tries to expand upward, Alex Hart, Corillian's president and CEO, is trying to move down-market.
The appeal of his vendor's current offerings "really stops at the top 250 institutions in the country," but by introducing a hosted version, "we feel we can reach the top thousand institutions in the country," Mr. Hart said in an interview. "It significantly broadens the market that we can reach."
Other banking software vendors also have shown a willingness to change their strategies to expand their target market.
S1 Corp. said this month that it had abandoned its subscription pricing model for its flagship Enterprise online banking software in favor of a licensing model. The Atlanta vendor, which typically sells to midsize banks, said the pricing shift was aimed at making Enterprise more appealing to large banks, which had shown little interest in the software when it was offered through a subscription.
Mr. Kraft said that various markets have long demonstrated preferences for specific pricing models, and now that vendors are starting to offer both pricing structures, banks may find it easier to compare offerings from different providers.
"It's very clear that the big banks want to license, to pay for it all up front and customize it, and the small banks want the hosted and the subscription kind of model," he said.
Though Mr. Kraft expects competition to increase gradually, he does not expect that Online Resources and Corillian will square off directly soon. "There is plenty of opportunity for them to share."
Online Resources "is unlikely to want to target Corillian banks," he said. Instead, it "is more likely to go after bigger banks that have older systems or systems that have been sunsetted or systems that are with vendors" that have been acquired.
"The same argument can be made the other way around" when it comes to Corillian's pursuit of credit unions, Mr. Kraft said. "At this point, both of these vendors have limited sales resources, so you have to pick your battles and figure out where you need to target."
