Banks Cash In Online

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Banks Cash In Online

Intuit, Microsoft in tie to sign up institutions

By Bruce Caldwell and Mary Hayes
Issue date: July 31, 1995

Early results in the battle between Intuit Inc. and Microsoft for the online home banking market have to be declared a tie. Many major banks--including 17 money center powerhouses, super-regionals and local institutions--have refused to pick sides and are offering software from both.

Intuit, with 8 million individual and small business customers, on July 14 announced it has signed up 17 banking partners. That prompted Microsoft, with about one-tenth the number of customers, to reveal that it also has deals with the same banks.

The announcements are the first major efforts by the two companies to expand their electronic commerce business following the death of Microsoft's plan to acquire Intuit. It's also the first time major financial institutions have indicated how they're planning to handle the new home banking push.

Start Of Something Big
"The wave of acquisitions of PC banking customers is just beginning," says Gary Meshell, VP of individual segments at Chase Manhattan Bank N.A. in New York, "and it's an open question who will win."

Microsoft plans to challenge market leader Intuit by making free copies of Money for Windows 95 available for downloading between August and October, according to Richard Bray, manager of the Microsoft Money product unit.

Intuit, which also has lined up American Express Co. and Smith Barney, will counter on Oct. 12 with new, online-ready versions of Quicken, Financial Planner, and T urboTax software. Banks will be charged processing fees, as yet undetermined, by Intuit Services Corp. (ISC), which will handle transactions for both Microsoft and Intuit customers. But it is up to the banks to determine if customers will be charged any fees.

The 17 partners are Bank of Boston, Centura Bank, Chemical Bank, Chase Manhattan Bank, Compass Bank, CoreStates Bank, First National Bank of Chicago, First Interstate Bank, Home Savings of America, M&T Bank, Marquette Banks, Michigan National Bank, Sanwa Bank California, Texas Commerce Bank, Union Bank, U.S. Bank, and Wells Fargo.

Scott Cook, Intuit's chairman, says he was "saddened" for weeks when the merger effort with Microsoft failed, but got over it when he learned that "it didn't make a difference to the banking partners."

The Microsoft-Intuit merger effort and its subsequent failure caused some initial confusion, adds Cindy Rich, VP of technology and banking operations at M&T Bank, a $10 billion institution in Buffalo, N.Y. Bu t banks were relieved, she says "once we realized we could still offer our products through both Quicken and Money."

Despite the impressive roster of banks that have signed up with Intuit and Microsoft, there are some notable holdouts. NationsBank and BankAmerica, for example, jointly acquired Meca Software Inc. last May to develop their own online versions of Meca's Managing Your Money software, which has 600,000 customers.

A spokeswoman for NationsBank, which has offered a proprietary PC banking service since 1988, declines to comment on the bank's interest in offering its customers software from Intuit or Microsoft, saying only that "we will have a product announcement soon."

Citibank, which has offered its proprietary online banking service since the mid-1980s, is in discussions with Intuit and will not comment on Microsoft, according to a Citibank spokeswoman.

Banks Shortchanged?
Long term, the new effort to make online home banking a mainstream activity could pose problems f or banks, industry experts say. PC banking can make bank locations irrelevant in terms of customer con-
venience, freeing customers to comparison shop for the best interest rates and lowest fees. "We think this will help us attract customers," says a spokesman for Sanwa Bank. "This levels the playing field."

PC banking means more than just increased competition among banks, says Scott Winkler, VP for systems operations at Gartner Group Inc., a consulting firm in Stamford, Conn. "These banks are afraid, and they don't want to be blindsided by Microsoft," he adds. "Microsoft claims it doesn't want to be in the banking industry, but it [just] doesn't want to put up buildings and ATM machines. It does want to be in the electronic commerce industry."

That's why banks are trying to cover all of their bases. Even in a conservative industry, fears that everything could be up for grabs are not being treated lightly.

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