Last month, Mountain View, Calif.-based financial management software developer Intuit announced plans to acquire Calabasas, Calif.-based online banking solutions provider Digital Insight for $1.35 billion. While the merger came as somewhat of a surprise to industry insiders, upon reflection, most agree that the deal makes business sense. The amalgam of Intuit and Digital Insight will enable the development of more-comprehensive small-business solutions, experts say, offering both companies an entrée into customer segments they had difficulty penetrating on their own, and will create an opportunity for banks.
"By partnering with an online banking provider, we will create solutions that are better for small businesses and consumers," said Steve Bennett, Intuit president and CEO, during a teleconference with reporters in December. "This will create value for them and help our growth, too."
The real synergies of the marriage will come in a product set that offers Intuit's personal financial management software packaged with Digital Insight's online banking solutions, according to George Tubin, a senior analyst with TowerGroup (Needham, Mass.). The trend in the industry, he relates, is to provide consumers with more features to help them manage their finances online. "Intuit invented this," Tubin comments. "With Digital Insight, Intuit will help banks implement personal financial management solutions in a way that is simple for consumers. [Intuit's] Quicken is very user-friendly."
A Big Deal for Small Business
Maggie Scarborough, a research manager with Financial Insights (Framingham, Mass.), says these same benefits apply to banks' small-business customers in the form of business financial management tools, and she maintains that the deal ultimately is about small business. "The No. 1 priority of North American banks on the business side is to drive revenue," she says. "This [deal] is certainly the way to do that. Digital Insight is the mediator between the small businesses and the banks, and Intuit owns the desktops."
Bob Meara, a senior analyst with Boston-based Celent, agrees that small businesses are at the center of the deal. "The larger-scope excitement here is for small business solutions," he says. "Internet banking has reached its peak for acquiring new customers. Banks are focusing anew on small business. Either they're taking their cash management solutions and dumbing them down, or they're adding things to their consumer solutions. This deal will create a best-of-breed application focused on small business. There's a gold mine for banks to get business customers to more fully utilize online resources because the cost of the services is so low."
Intuit brings with it a vision to "morph desktop software with server-based solutions," Meara continues. "They wanted a provider [such as Digital Insight] that did a good job with that kind of application hosting."
"That's where the opportunity is," comments Financial Insight's Scarborough. "Banks want to be the desktop for small business. This [deal] provides an opportunity to really do some straight-through, integrated financial services."
Jeff Stiefler, chairman, president and CEO of Digital Insight, tells BS&T that the deal will help financial institutions "further penetrate into a very large market of nonconsumers. The proprietary capabilities we'll have together will give banks that work with us an advantage over those that don't." * --Maria Bruno-Britz