That has led banks both large and small to hook up with ASPs to deliver more services more quickly. It also has persuaded a handful of the industry's biggest banks to become ASPs themselves.
The bank-as-ASP has emerged on the commercial side of the business, where behemoth banks have a history of servicing smaller banks and businesses.
Mellon Financial, for example, has three offerings: TradeLinks, an electronic bill-presentment, payment and document-exchange service for businesses; MerchantLink, an order-management and payment-processing service for e-businesses delivered through a partnership with ASP iComs Inc.; and EnternetBank, a treasury management service. The latter two services are targeted at other banks, but all three are delivered on a pay-as-you-go, ASP basis.
"We've been an EDI provider for well over a decade, and TradeLinks grew out of that business," says Randy Lichtenstein, e-commerce product developer manager for Pittsburgh-based Mellon, which has US$488 billion in assets. "We saw a few years ago that our customers had reached a plateau, that they had no more EDI-capable trading partners. So we asked ourselves, 'How could we use the Web?'"
Huntington Bancshares ââ,¬"with partners Compaq, ASP Corillian, Microsoft and SAICââ,¬"next month plans to open the doors on e-Bank. Bill Randle, executive VP at the Columbus, Ohio-based bank, de scribes e-Bank as a service that will allow banks to aggregate their myriad product offeringsââ,¬"banking, insurance and investments, among othersââ,¬"into a single user view. Huntington is the first, and so far only, bank signed up for e-Bank, but Randle hopes to enroll an additional dozen banks next year.
Another goal of e-Bank, says Randle, is to create a network of banks and other providers like insurance companies that can share products as well as resources. For example, an e-Bank bank could rebrand and sell insurance offered by an e-Bank insurance agent, or a bank without brick-and-mortar sites in Detroit, for example, could utilize another member bank's Motor City branches. The hoped-for result is a mechanism for small and midsize banks to band together in order to survive.
"It is getting difficult for banks of any size to compete with the really large banks like Bank of America or Wells Fargo," notes Randle.
"There are a lot of relationships in the banking industry, especially among the banks not in the top 10, to share the investment and provide a best-of-breed solution," says Alex Hart, executive VP of corporate development at Corillian.
Wachovia, a $71 billion bank, has several ASP projects in the works, including a deal announced earlier this month between FMR Systems (an ASP) and Silas Technologies, to deliver corporate customer-relationship-management services to other banks on an ASP basis. Wachovia also is working with Clarus to offer the bank's business customers Clarus eMarket e-procurement services by year's end. In addition, the bank invested $5 million in Clarus and has another equity investment in Corillian.
So how does Wachovia determine when to enlist the help of an ASP? "If we can't provide the service ourselves, and it isn't a core competency of ours," says Frank Robb, Wachovia's CIO in Winston-Salem. "If we have to provide a feature function or service, we'll go to someone that has already done this. We have a tradition of outsourcing."
All banks have a history of outsourcing, which has helped ASPs get a foot in the door of what is an otherwise reluctant and conservative industry. Nevertheless, it still isn't easy selling to banks because they have extremely strict security requirements. "Security concerns are sky-high at banks," says Steve Williams, managing director of M One , a financial industry consultant. "And, frankly, some ASPs didn't manage security and infrastructure as banks would like."
What's more, larger banks have proprietary batch applications that they're loathe to trash.
"The 'not invented here' syndrome comes from the banking industry," says Jaime Punishill, senior analyst at Forrester Research. "Most of these ASPs are fighting an uphill battle with the banks. If you're Bank of America, these ASPs look dinky. And banks are fairly risk-averse. The most important thing for these ASPs is to get more clients. They should be tackling a lot of small fries first to prove they can do it."
"You gotta hit the critical mass of customers so you can amortise all the costs," says Chet Thompson, VP of marketing and communications at S1, a financial ASP. "You can't be a tiny business and survive for long. You have to have an operation people believe in. No one will do business with you if there are questions about security and privacy, or if you're not competitive on costs."
Customers are the most important partners a financial ASP can have, notes Alyssa Dver,VP of marketing and customer care at Sedona, a customer-relationship-management ASP. Sedona lists IBM and E.piphany among its partners. But more important, at least to potential clients, is the fact that Sedona has 90 customers. "I can say I partner with IBM, God, whomever, but what banks really want to see is other banks using the service," says Dver.
And the services they're primarily interested in, as Wachovia's Robb points out, are services outside their core competency.
"The opportunity is more in information-based services rather than commerce," says M One's Williams. An example of a commerce-based venture, adds Williams, is a bank that offers small businesses a place to buy office supplies. "We're involved in one, and our revenue share is a goose egg."
Such services may be outside a bank's core competency, but it's also an area already rife with competition that doesn't leverage a bank's expertise in financial management. "The opportunity is more in the fact that the bank has all your account information, and the natural thing is to extend and manage all that information better," says Williams.
Wells Fargo, for example, plans to launch a payroll service for small businesses in the first quarter of next year, according to Mark Baumli, senior VP of Business Internet Services at the San Francisco bank. Wells Fargo is now in contract negotiations with a payroll ASP, after sending out an RFP to eight or nine ASPs and narrowing it down to three that made presentations to the bank's highest-level executives, says Baumli.
"ASPs were always in our online strategy," says Baumli. "We think integrated platforms that share data across sites are the way to go," and ASPs are the way to enable that.
So, while larger banks may be competing with ASPs to deliver financial services, they're also working with them. In some cases, they're also providing a much-needed source of equity. Analysts disagree, however, whether it will become commonplace for banks, which now are allowed under Gramm-Leach, to outright buy up ASPs in an industry undergoing widespread consolidation.
One thing is for sure, though, notes Steve Reich, senior VP of sales and marketing at Digital Insightsa a large financial ASP: "Bankers own the most valuable real estate on the Internet."
