Two important conferences were held the third week of April. The first, sparsely attended by bankers, dealt with an issue fundamental to the future of checking accounts: Internet Billing. The second, Microsoft’s third annual Internet Banking and Brokerage conference, was attended by most major financial institutions and covered subjects crucial to the future of the banking industry itself. Here’s our notes from both.

IQPC’s first conference on Internet bill presentment was held last November in Chicago. It attracted many of the nation’s top billers but just two bankers. The second conference, held April 14-16 in San Francisco, attracted twice as many attendees but still only a couple dozen bankers from just six banks. For better or worse, most financial institutions are apparently willing to delegate the R&D in this area to vendors, consultants, and the occasional newsletter editor.

Here are the conference highlights:

•  Florida Power & Light www.fpl.com is the only biller currently presenting bills in Quicken 98, but several more companies are expected to begin within the next few months.
•  Florida Power & Light has only 2,500 online bill paying customers out of their base of
  3 million despite being the first utility to present bills on the Web beginning the summer of 1996 and being one of the first to present bills on Checkfree’s Ebill site beginning in April 1997.
•  EF&D www.efd.com launched the first bank-branded bill presentment program at Suffolk County National Bank (Riverhead, NY; $843 million) www.scnb.com The bank has two clients up on EF&D’s Billsite www.billsite.com the water company and a major lumber yard.
•  EF&D believes there is an excellent opportunity for banks to serve middle-sized billers with bill presentment services. The company reasons that large billers will be served by MSFDC and Checkfree; tiny billers will use their existing accounting programs such as QuickBooks that will be enabled for bill presentment in the near future. Mid-sized companies will be the only ones left without a cost effective presentment alternative.
•  Intuit is forecasting that 60% of U.S. households will have a PC in 2002 (up from 41-42% today).
•  Bill presentment will be available on Quicken.com by year-end; Checkfree, partially owned by Intuit, will process payments.
•  According to Intuit, within Quicken software, the bill is biller branded and the payment is bank branded (for participating banks). It’s unclear if that model will hold on Quicken.com.
•  The best lines came from Gary Craft, EC analyst with BancAmerica Robertson Stephens: “If a bank wants (to do EBP) they can knock everyone off…but we haven’t seen that happening yet;” and “Banks already have two of the three linchpins for bill presentment: eyeballs and good funds, all they need are the bills.”

Microsoft’s invitation-only event attracted some 400 banks, brokerages and solution providers. Microsoft’s presentations were well balanced, offering pros and a few cons for doing things the Microsoft way. They didn’t put Gates on stage this year. Instead, Microsoft luminary Pete Higgins ran through the “Web lifestyle,” Microsoft’s current Powerpoint du jour.

The Key Points

•  Microsoft is taking a software approach to its Web-based businesses, selling their underlying platforms as tool-kits and/or turnkey systems. Microsoft Investor www.investor.com will be made available for licensing this summer. Financial institutions will be able to use all or part of the platform to build their own stock info/trading services. Speakers hinted that other Web businesses, Expedia and the soon-to-be-released Home Advisor, would follow a similar route. (Expedia is already available on a co-branded basis, see American Express. That bodes well for banks looking to implement MSFDC’s program.
•  Microsoft Home Advisor www.homeadvisor.com is coming this summer. By partnering with Realtors, multiple listing services, and lenders, they expect to be the first Web site to offer a complete home buying experience including:
  – getting started (educational)
  – finding a neighborhood
  – finding a home
  – finding a loan
  – offer and closing
  
  Program Manager Larry Cohen, (larryco @microsoft.com) described the business model as “similar to Quicken.com,” with two revenue streams: advertising and prequalified/preapproved mortgage applications delivered to lenders for a finder’s fee. He also said there is a strong likelihood that the HomeAdvisor will be licensed for private-label versions.
  


•  MSFDC won’t be vaporware much longer. Co-president Chuck White said MSFDC has “more billers wanting to do this than we can handle.” He also released a revised implementation schedule that calls for launch of bill presentment in Q4 1998 and pay-anyone bill pay in early 1999.

  Mr. White promised that its pay-anyone service would be more compelling because it would address many of the “timing” issues associated with current programs. During the Q&A he predicted that 15% of U.S. households would be using online bill presentment in some form within five years and MSFDC would be processing 750 million payment transactions per year, 5% of the 15 billion bills paid each year. (Editor’s note: this is 10 times the current volume of transactions processed by industry leader Checkfree. At $0.30 per transaction, which is probably not sustainable, that would equate to $225 million per year in transactions, with $20-30 million of that going to banks for payment authorization. That doesn’t include licensing and advertising revenues.)

  
  
•  Downloading Web transactions into Microsoft Money should still be part of your game plan. The PFM will ship on 9 million PCs this year. By simply adding ActiveStatement downloading to your Web, a free feature available from Microsoft, you become one of 150+ financial institutions listed on Microsoft’s Web site. You also have the option of distributing a co-branded version of Microsoft Money to customers, though the $15-20 per copy price has discouraged all but five financial institutions from following this strategy (see table below right).

Some Numbers