In the past three weeks, Intuit Inc. has struck a pair of deals to add online banking, bill-pay, and transaction processing capabilities to its payments lineup.
The company says it wants to transform itself from an electronic banking also-ran into a key provider of payments technologies to small businesses, a market it says is underserved.
"It's our goal to be able to provide a one-stop shop for those customers," said Joe Kaplan, the president of Intuit's Innovative Merchant Solutions division. "Today, people aren't really doing that."
Alenka Grealish, who manages the banking group at the Boston market research firm Celent LLC, said that "ultimately, Intuit has the grand plan of making the financial life of small businesses easier."
The company announced a $142 million deal Thursday for the transaction processing software vendor Electronic Clearing House Inc. On Nov. 30 it announced another payments deal, for the online banking technology provider Digital Insight Corp.
Small businesses are a third of Intuit's customer base, but the Mountain View, Calif., company has recognized that its offerings do not meet their payments needs.
For example, merchants can use Intuit software to accept credit card payments, but Dan Wernikoff, the director of product management for Innovative Merchant Solutions, said "an extraordinarily large segment of our customers" were taking payments by check, "and they were unhappy with the existing process."
Intuit also offers software that enables companies to create and send invoices electronically, but they cannot receive payments electronically without signing up with another provider, Mr. Wernikoff said. By acquiring Echo, he said, Intuit could "close that loop."
Echo, of Camarillo, Calif., offers software for processing credit and debit card transactions and automated clearing house payments.
Intuit agreed to pay $1.35 billion for Digital Insight, which resells consumer bill-payment services from CheckFree Corp. of Atlanta and from Metavante Corp., a unit of the Milwaukee banking company Marshall & Ilsley Corp.
When Intuit announced the deal for Digital Insight, of Calabasas, Calif., Jeff Stiefler, the seller's chairman, chief executive, and president, said his company's products for small businesses offered just "relatively basic functionality." Mr. Stiefler has been named the president of Intuit's new created financial institutions division.
Intuit plans to make elements of QuickBooks, its popular small-business bookkeeping software, available online to customers of Digital Insight's bank clients. Intuit has long sold its software through retailers, and its online versions must still be developed; they are expected to be available next year.
Mr. Kaplan said Intuit eventually plans to merge Echo's payment services with the upcoming online payments software, though it has not completed its planning for that project. The Echo and Digital Insight deals are expected to close next quarter, and it is not yet clear whether Echo would become part of Mr. Stiefler's new division.
Even if Echo and Digital Insight do not end up in the same division, their products and services will be offered together, Mr. Kaplan said. "Integration is the key to success," he said.
Intuit was a pioneer in electronic banking. Its Quicken software was once extremely popular with consumers who used it to track their spending, but with the advent of online banking services, Intuit's personal financial management software has become less popular.
Before making either of these deals, Intuit began developing products for financial institutions. In November it announced products for account opening and funding, account switching, fraud assessment, and initiating ACH transfers. And it has long offered a service for banks to be able to export online banking data to its Quicken and QuickBooks desktop software.
The fate of those payment products is uncertain, because many of them resemble CashEdge Inc. services that Digital Insight resells exclusively to some segments. In its agreement to resell CashEdge's account-opening software, Digital Insight got warrants to acquire 5% of CashEdge.
Ms. Grealish said that there are few payments services aimed at small businesses.
"They've been underserved in the tools they've had" to manage their cash flow, she said. In deciding which billers to pay first, "they triage. A lot of the stuff around cash flow, they've had to cobble together."
Making payments is often paper-intensive for these businesses, and offering them ACH capabilities could make their financial management cleaner and faster. "A small business just wants to hit a button," Ms. Grealish said.
But even after buying Echo and Digital Insight, she said, Intuit would lack the ability to send merchants' payments to other businesses that are not already connected to electronic payment networks. To solve that problem, she said, Intuit would probably need to make another acquisition. (Intuit executive would not discuss further M&A plans.)
But Ms. Grealish said Intuit is clearly making progress toward offering small businesses the payment services they need. The more these businesses show interest in shifting away from check, she said, the better Intuit will be positioned to offer them its products. "As more small businesses pay online, Intuit wins."
