Consumer demand for more-robust Internet tools is helping push forward banks’ technology investments, Fiserv Inc.’s chief executive noted during an Oct. 27 earnings conference call with analysts.
U.S. Bancorp is illustrating that point in choosing to install the Brookfield, Wis.-based technology vendor’s Corillian Online system to deliver Internet banking, bill-payment and personal financial-management tools to customers, Jeffery Yabuki said during the call.
“This is another proof point supporting what we believe is the early stage of a global renewal of the online-banking channel,” Yabuki said.
Many large banks run their online banking channel using proprietary systems they built internally. That U.S. Bancorp is upgrading its system reinforces the belief that Internet banking has evolved from being an ancillary service to a “primary customer touch point” for banks, says Nicole Sturgill, a research director for delivery channels at TowerGroup in Needham, Mass.
“People just don’t need to go to the branch,” Sturgill says. “Because of that, banks have to make that channel a complete, robust channel.”
U.S. Bancorp would not comment about its plans.
The $291 billion-asset bank holding company, which already uses Fiserv’s bill-payment technology, is among several large U.S. banks in the process of “re-upgrading their online experience,” which is not surprising because many banks have not made heavy investments in the channel since the early 2000s, Yabuki said.
“It’s just about time to remodel that experience, given everything that’s going on today,” he said.
Banks are under pressure from new regulations, making the desire to promote lower-cost channels such as the Internet more important, experts say.
Doing so could result in “efficiency gains that will be driven by moving customers there as opposed to some of the more-expensive ways of interacting with clients,” Yabuki said.
In general, more banks are starting to invest again in technology after retrenching because of the financial crisis and uncertainty over the impact of new regulations, analysts say.
Fiserv on Tuesday reported that revenue for the quarter ended Sept. 30 rose 3.3%, to $1.03 billion from a year earlier (
Jacksonville, Fla.-based Fidelity National Information Services Inc., or FIS, also on Tuesday reported a 3.3% increase in its adjusted revenue to $1.29 billion. The figure includes results from Metavante Technologies Inc., which FIS acquired in October 2010 (
Both companies say increased clarity around new financial regulations has helped banks grow more confident in their spending decisions, though the regulations remain an ongoing concern.
Fiserv is having more discussions with banks about new products, but clients are slow to actually make the decision to buy, Yabuki said.
“The urgency is more around the focus of the products that they want to bring in, but there’s little urgency for people to pull the trigger on anything on any given day,” he said.
Fiserv, FIS and Jack Henry & Associates Inc., which primarily focused on selling core processing systems to banks in previous years, more recently have been pushing new online and mobile services.
John Kraft, senior research analyst who follows Fiserv for D.A. Davidson & Co., says banks are interested in new technology areas as way to recover fee revenue lost to regulations as well as attract and retain customers. “They want to pick up share, and one of the ways you can pick up new customers is by having a better online mousetrap,” Kraft says.
Charging fees for some new technology services, such as mobile banking, is not likely to happen, but having advanced services in such areas may make it easier for a financial institution to justify charges for other traditional bank products, he says.
“It creates value, and it creates loyalty,” Kraft says. “If you have all these bells and whistles, maybe it [better] enables you to charge for your checking account.”
Banks likely will not charge for mobile services, but Fiserv does expect its clients to charge their end customers for using the vendor’s ZashPay person-to-person payments system, Yabuki said.
The PayPal-competitor service, which Fiserv introduced earlier this year, enables users to send funds to other individuals using a recipient’s mobile-phone number or e-mail address. More than 400 banks have agreed to offer the service to their customers, and Yabuki expects many to charge a per-transaction fee to use it.
Internal research suggests “there’s very little consumer resistance to reasonable pricing” for the service, he said.
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