(Surprise! They may already have your data.)

www.verticalone.com

After logging onto VerticalOne, you are presented with a high level snapshot of your account with the various information providers.

In this case, we are shown outstanding balances for our Citibank MasterCard and NextCard Visa.

VerticalOne is the first company to launch a financial statement aggregation business. In other words, they pull customer account data right out of your Web site and display it in one integrated view on their Web site. The service also aggregates bills, frequent traveler statements, and email accounts.

If you are a frequent OBR reader, you will not surprised by VerticalOne.com’s business plan. We first discussed the topic in general in early 1998 (OBR 3/98). Last August we profiled the first two companies concentrating on the frequent flier segment, MaxMiles from Mileage Maximizer and Biz Miles (OBR 8/98,). More recently, in our 1999 Predictions column, number seven was “Banking Statement Consolidators Appear” (OBR 1/99).

The Company: VerticalOne is a privately held firm founded last year in Atlanta. It currently has 71 employees including a founder and exec team from various high tech and telecom companies. The service has been in testing for several months by 7,000 users recruited from MyPoints.com. The company wisely filed patents on the process, whether they will be approved and enforceable, is impossible to predict.

EVP Marc Gorlin briefed us on the service in late August. As he put it, “(VerticalOne) will do for personal data what Yahoo! did for generic information.” Cooperating banks, stock brokerages, and credit card companies are crucial to the service, both as providers of the raw data, “information providers,” and as distribution partners, “destination sites.” The company believes that ultimately it will help information providers by drawing incremental traffic to their sites. To that end, VerticalOne mines only top-level account data to display on its integrated statement. Users wanting statement detail and transactions use a link directly into the information provider’s Web site.

The company has received considerable attention in the technology press with articles in Wired, Upside, Red Herring, and others. They also were featured in American Banker on Aug. 31 www.verticalone.com/americanbanker.html Evidently, the company’s strategy has struck a chord with business and technology writers. For example, read these rave reviews: (1) In Online Bill-Paying, It’s BankOne vs. VerticalOne, BusinessWeek Online, Aug. 26 www.businessweek.com/reprints/99-db/nf90826c.htm (2) VerticalOne: The App That Could Kill Quicken, The Industry Standard, Aug. 20, www.verticalone.com/istandard.html

 

Company Timeline

Milestone	Date	Comments
Founded	Oct. 98
Patents filed	Oct. 98
Domain name registered	Oct. 98	Also registered: Webraker.com, MyPersonalInfo.com, Incontex.com, YourPersonalInfo.com, SurfingSucks.com, AutoRegister.com, AccountMinder.com
Seed financing	late 98	$3.9 million
First round financing	May 25, 99	$12 million from Flatiron Partners, Chase Capital Partners, Kinetic Ventures, TTC Ventures and others
Service launched	Aug. 2, 99

Source: company, 8/31/99

How it Works:

1. Users sign up through one of the company’s distribution partners (the company does not intend to market the service directly).

2. Users agree to let VerticalOne act as their agent and pull account information directly out of financial institution servers.

3. Users determine which of the more than 100 VerticalOne-enabled info providers they have accounts with*.

4. Users input their info-provider usernames and passwords so VerticalOne can pull the data. If the user doesn’t have a username/password, or if it has expired, VerticalOne links the customer to the info providers enrollment screen to sign up.

5. On subsequent logins, high-level data from the info provider are automatically displayed in an aggregated statement (see screenshot).

6. To view account detail or to make transactions, users are linked to the info provider in one of two ways:

a) Quick Login: VerticalOne automatically passes the username/password combo (from step 4) to the info provider, logging the user in.

b) Link: This alternative simply delivers the user to the info provider’s login screen to manually enter username and password.

*Users can request that new info providers be added. Right now, the company is adding about 10 new ones per week.

 

Account set-up screen for info provider access:

If you already have a username/password, you simply enter it into this form. VerticalOne even provides help remembering usernames, such as this social security number (SSN) prompt to set up NextCard access

Automatic Login: When enabled, clicking on “Quick Login” opens a new browser window, in this case logged into NextCard, on top of the VerticalOne screen.

User Benefits: The system currently provides a several user benefits:

•  summary account data from multiple financial institutions displayed on one screen
•  one login to access multiple password-protected databases
•  fewer passwords to remember
•  helps users identify info providers that are with Web-based account access
•  convenient jumping off point to all online accounts, like “bookmarks on steroids”

User Disadvantages: There are serious disadvantages as well, some easily fixed, others more problematic:

Major

· privacy/security: do you really want to have ALL your accounts and passwords in one place; if your VerticalOne account is ever compromised, you are REALLY going to have problems

Minor

•  one more password to remember
•  only supports one account per bank (scheduled to be fixed in Q4 99)
•  slow: if you just want to know your checking account balance, its probably faster to go directly to the bank’s Web site
•  the initial signup process is tedious trying to remember usernames and passwords to your other accounts

Future User Benefits: Weighing the pros and cons of the current beta version, the cons probably win out. But down the road, the VerticalOne product can become far more valuable to end users. Consider its power when, and if, these functions are added (these are our ideas, VerticalOne is taking the position that its destination partners will layer these on top of the aggregated statements).

• funds transfer engine: the company, or a distribution site, could hang an ACH (electronic transfer) button on the site and allow users to transfer funds to and from any listed account
• balance transfer engine: along the same lines, users could use the site to transfer balances amongst credit cards and loans to get the best rate
• deal finder: the company, or its advertisers, could prod users to make transfers (e.g., “Jim, please note, you could save $37.12 per month by transferring your Citibank balance to your NextCard account, press transfer to do it now.)
• Quicken-like budgeting/categorizing functions: everything Quicken does on the hard drive could be mimicked by VerticalOne

Bank Opportunities: You can work with the company in three ways:

1. As a private-branded distribution partner with no banner ads. In VerticalOne parlance, you would become a “destination site,” paying per-user fees for the aggregated content. This is expected to be the typical choice of ecommerce sites such as banks or telecom companies (e.g., Southwest Bell).

2. Private or co-branded distribution with banner ads, splitting the advertising revenue with VerticalOne. This is the model that portal and media companies will use, e.g., PlanetDirect, Inside New Orleans, and TheStreet.com (see table below).

3. As a silent partner or “information provider,” allowing VerticalOne to mine your account data on behalf of users. You can elect to have the company pull the data one-by-one, logging in as each user; or you could develop a direct data feed to VerticalOne to speed up the process and potentially provide more up-to-date information. The first option requires no expense or contract on your part. In fact, it will be done with or without your permission. However, VerticalOne will allow banks to “opt out” and deny data access, but we advise against doing so for reasons we’ll discuss later.

Destination Partners

Launched	Signed
BellSouth	AnyDay.com
InsideNewOrleans.com	Cox Interactive Media
MyPoints.com	iVillage
Planet Direct	Orchestrate
	TheStreet.com
	USA.net
	Women.com

Source: VerticalOne, 8/28/99

Contact: Marc Gorlin is EVP, (678) 443-7902.

Company Executives

Position	Name/ Email*	Previous Experience
CEO	Gregg Freishtat/gsf	SVP Premiere Technologies (NASDAQ: PTEK); CEO Telet
Pres/ CFO	Neal McEwen nmcewen	CEO of Intelligent Systems Corp. (NASDAQ: INS); CFO Peachtree
EVP	Marc Gorlin mgorlin	Co-founder of Pretty Good Privacy (acquired by Network Associates)
CTO	Palaniswamy Rajan/raj	CEO Emerald Systems
SVP Prod. Dev.	Vikas Rijsinghani vikas	Pres. Neoglyphics Media Corp.; Sun Microsystems
VP Marketing	Sandra Dunn sdunn	MCI WorldCom card division
VP Biz Dev.	Todd Lesher tlesher	BellSouth Advanced Data Services Unit and BellSouth.net; McKinsey
VP Controller	Vinod Keni vkeni	CFO HomeCom Communications (NASDAQ: HCOM)
VP Operations	Timothy O'Brien/tobrien	Dir of Tech Support at Equifax
VP Media Strategies	Peter Robson probson	SVP Strategic Planning at Harte-Hanks

*username@verticalone.com , e.g. gsf@verticalone.com

 

 

Analysis

VerticalOne’s service is rough around the edges, “just out of beta,” as they say in the industry. It’s slow, not particularly intuitive, and sparsely explained. But, you don’t have to look far down the road to see that it could take off in a big way.

VerticalOne must find big name financial institution(s) to add credibility and comfort users. We believe the company will have little trouble finding willing partners. No banks are signed yet, but VerticalOne is in active discussions with several top 10 banks, one of which is already on its fourth round of due diligence meetings. In a follow-up discussion, Sep. 17, the company was confident enough to predict that a major bank and/or brokerage signing would be announced within the next few weeks.

Regardless of whether VerticalOne ultimately drives this new business model forward or not, the concept of statement aggregation is perfect for the Web and will happen. Here are the two biggest issues VerticalOne or any budding rival must overcome:

1. Chicken-and-Egg Dilemma: It’s the same predicament the bill presentment industry faces; consumers won’t use it until a critical mass of statements is available. Distribution partners won’t market it until there is a critical mass of users. But there is one HUGE difference from the Transpoint/Checkfree ebilling model. VerticalOne doesn’t need the cooperation, or even the permission, from info providers to aggregate their data on its site. Users themselves provide the authorization and keys to unlock info provider databases; namely, their usernames and passwords. VerticalOne’s business is more like scan-and-pay bill presentment, providing immediate utility with the promise of even better things down the road.

2. The Trust Factor: Frankly, even though we had researched the company and quizzed a senior exec at length, it made us very uncomfortable entering all our personal info into the VerticalOne server. They now know my common login names, financial account numbers, social security number (used at NextCard), plus name, address, etc. Even as an ecommerce early adopter, I would never have considered signing on without assurances from a trusted and regulated third party, as to the soundness of security and privacy functions.
 

We can’t emphasize enough the significance of this business model for existing players. Right now, we would label it the NUMBER ONE most significant event of 1999. Because the service can be ad supported and free to users, it is a perfect fit for general portals such as Yahoo! and Excite and specialty financial hubs such as Quicken.com. However, we think that it works even better for a financial institution, since they have “financial trust.” It will be especially powerful for online brokers looking to make it easier for users to view all their balances and sweep money into the brokerage account to invest.

Should You Opt Out? VerticalOne’s business would be a non-starter if a significant number of major financial institutions and credit cards opted out, by either blocking access from VerticalOne servers or telling the company to take a hike. We applaud VerticalOne for allowing information providers to make their own choice without cease-and-desist letters and litigation.

However, we don’t think many companies will opt out. Your gut reaction may be to pick up the phone and tell the company to stay out of your servers. If any customers complain, you simply trot out “privacy/security” concerns and leave it at that. Our recommendation is to count to ten and think it through. What happens if you do opt out?

• You make it more difficult for certain customers to access their accounts.
• You pass up an opportunity to have your name appear on the list of info provider partners; instead, VerticalOne will refer your customers to other participating companies.
• You pass up Web traffic from customers linking in from the VerticalOne portal.
• You could lose customers completely.

Action Steps: VerticalOne is currently most interested in talking to large companies. They hope to negotiate a blockbuster deal with a “marquee” financial institution to provide instant credibility and a validation of VerticalOne’s security and privacy procedures. It will almost certainly be an equity partnership. But even if you are not working at a large company, there are ways to participate in the statement aggregation business. See the chart on the following page.

 

Statement Aggregation Action Plan

Applies to:	What	When
Major U.S. banks	Talk to the company now, and if you like what you see, try to beat your peers to the first big deal (hint: think equity); even if you are not first, strongly consider aggregating statements on your site either as a VerticalOne destination site or by building the capability in-house.	ASAP
Smaller financial institutions	Boost your negotiating strength by approaching VerticalOne jointly with your core processor, or with a group of like-minded financial institutions.* For example, a group of geographically dispersed credit unions could develop an attractive proposal, benefiting all.	next few months
Credit card issuers	Fly to Atlanta tomorrow and become a distribution partner before the end of the year; once you get customers coming to your Web site to view all their card statements, you can post a balance transfer function across the top of the page and encourage users to switch their balances “shown below” to your credit card.	yesterday
Other financial companies or portals	Consider working with VerticalOne to increase Web site traffic and facilitate financial transfers to your accounts.	ASAP
All	Register for the program and see how it works.	ASAP
All	Contact VerticalOne to get your name in the queue to become a supported info providers.	ASAP
All	Educate your service reps about the program and why you do or do not support it.	Q4 99
All	Realizing that VerticalOne and other similar services will deliver users into your site already logged in, review your Web site design to make sure users can easily jump to other areas; also make cross-sale offers after login.	next six months

*As we did last month (OBR 6/99), OBR will be happy to serve as a matchmaker for our subscribers to find each other. Financial institutions interested in creating a joint proposal to take to VerticalOne, email us at v1@netbanker.com and we’ll pass your name on to others and vice versa.

 

Final Thoughts: It may take ten years, or maybe only two or three, but eventually, this is how the financial Web will work. Ignore statement aggregators in general, and VerticalOne in particular, at your own risk.8

The first statement aggregator was Mileage Maximer from MaxMiles.com (see OBR 8/98).

 

 

VerticalOne Information Providers

 

Bank Checking Accounts (33)

AmSouth

Bank One

Bank of America

Bank Boston

Chase

Citibank

Crestar

Fifth Third

First American

First Republic

First Union

Firstar

Fleet

Harris Bank

Huntington

Key

LaSalle

Mellon

Mercantile

National City

NationsBank

Net.B@nk

Northern Trust

PNC

RegionsBank

SFNB

Salomon Smith Barney

US Bank

Union Bank of California

Union Planters

Wachovia

Washington Mutual

Wells Fargo

 

Credit Unions (5)

Associated & Federal ECU

First Technology CU

Orange County TCU

McDonnell Douglas WFCU

Wescom Credit Union

 

 

Credit Cards (25)

AARP Visa

AT&T Universal Card

America Online Visa

American Express

American Express Optima

Bank One Visa

Bloomberg Financial Visa

British Airways Visa

Dell Visa

Discover Card

E*TRADE Visa

Fifth Third

First Union

First USA Visa

MBNA

MileagePlus Visa

National Discount Brokers Visa

NationsBank

New York Life Visa

NextCard Visa

Regions Bank

Southwest Airlines Visa

Wells Fargo MasterCard

Yahoo! Visa

iVillage Visa

 

Stock Brokers (18)

American Express Financial Direct

Ameritrade

Brown & Company

Charles Schwab

DLJdirect

Datek Investments

Discover Brokerage

Dreyfus

E*TRADE

Fidelity WebXpress

Mr.Stock

National Discount Brokers

NetInvestor

SURETRADE.COM

Salomon Smith Barney

Vanguard

Waterhouse WebBroker

 

 

Billers (8)

AT&T Long Distance

AT&T Wireless

AirTouch Cellular

BellAtlantic Residential Services

BellSouth Residential Services

MCI OneSavings Long Distance

Sprint PCS

USWest Residential Services

 

Travel Rewards Programs (12)

Air France Frequence Plus

Alaska Airlines Mileage Plan

American Airlines AAdvantage

British Airways Executive Club

Continental One Pass

DeltaSkyMiles

Horizon Air Mileage Plan

Northwest WorldPerks

Swissair Frequent Flyer Program

TWA Aviator's Program

USAirway Dividend Miles

United MileagePlus

 

Email Services (24)

AltaVista

AmexMail

Angelfire

BellSouth

CBS Sports

CoolMail

CustomPOP3

DejaNews

E*TRADE

Eudora

Excite

GTE

Hotmail

MindSpring

MyOwn

Net@ddress

Orchestrate

PlanetDirect

Snap

Women.com

Xoom

Yahoo!

iName

iVillage

 

Source: VerticalOne, 9/15/99