In the latest versions of PC-based home banking, users' computers are linked to their bank accounts, thereby relieving users of the considerable tedium of entering data from their canceled checks and those written through online billpay services. Fewer than 100 banks offer this new service, although those banks serve millions of potential users. If these relative positions persist, then the whole market for home banking will be served by fewer about 2,000 banks.
Will the industry's remaining 8,000 banks permanently opt out of home banking? Can they opt out and survive? What will it take to persuade the 8,000 that this long-slumbering market is now worth the risks and disruption of making the necessary changes to their data-processing systems?
Visa Interactive, a subsidiary of Visa International, recently announced a standards-based, infrastructure for home banking services which could help the reluctant 8,000 find a way into the home banking market. Banks, of any size surely should be interested in entering the market. After all, every financial-service provider must court the same upscale customers who increasingly insist on anytime, anywhere banking. And if electronic banking saves on backoffice costs, smaller banks can't compete without those savings.
For the majority of banks that now offer only rudimentary online services (or none at all), Visa is building the foundation from which banks can launch online services at times and levels of each management's own choosing. The foundation accommodates "middleware" hardware and software systems that link banks' legacy systems with online customer interfaces: telephones, PC financial software, Web browsers, and such future devices as personal digital assistants, television settops, 3D virtual-reality avatars, and whatever comes along. An increasing share of middleware systems will be outsourced. That will complicate network communications and make standards-based solutions an ever-stronger imperative.
Bank-owned Visa, already a trusted network partner of 19,000 financial institutions worldwide, makes a compelling claim to be a major player.
Visa Interactive, a subsidiary of Visa International, operates a central server which receives transaction instructions from customers via telephones or PCs, and coordinates those instructions with data from customers' bank accounts, which are also connected to the Visa server. If a transaction involves interbank settlement, the data is passed on to Visa International's existing payment-processing system.
Visa Interactive also offers its own PC-based home banking and
a billpay system, called ePay. The company says that by the end
of the year it will demonstrate a new two-way service for presenting
and paying bills--a service which it credibly claims could revolutionize
current methods. (Those systems will be discussed in next month's
column).
The key to Visa Interactive's system is a pair of connectivity standards: Access Device Messaging System (ADMS) is the protocol for connecting customer interface devices to Visa's central server; Electronic Banking Messaging System (EBMS) connects banks' customer databases to the Visa server. Specifications for both protocols are open and nonproprietary--which gives software designers, middleware providers, and banks maximum flexibility with minimum risk.
ADMS doesn't only accept incoming transactions; the protocol also synchronizes those transactions so that a customer coming in via any device, along with the bank's call center, always get the same updated balance information. EBMS can update transactions either in real time or in batches.
Visa supports new customers by checking out linkages and validating access devices. Other than that, going online with a new service is "plug-in simple," the company says. Visa also administers system rules to help users handle such problems as what to do if someone picks up the phone in the middle of a billpay transaction.
Service vice-president Brent Robinson says that Visa has commitments
from 90 institutions, of which 50 are now in pilots and 11 already
in production. Bank-owned Meca Software has a longstanding arrangement
with Visa Interactive to process transactions for customers of
its Managing Your Money personal-finance software. More recently,
Microsoft said it is trying its Money software package to the
Visa system. All of its products and services are bank-branded,
Visa stresses, meaning that every user sees only the logo of her
bank during home-banking transactions.
Although the Visa network is a private one, it can process transactions that originate on the Internet.
Five Paces Software has been certified to offer an ADMS-complaint version of the home-banking system it developed for Security First Network Bank, the first Internet bank. Any of the banks that use any Visa Interactive service will be able to quickly add Five Paces' full suite of Internet banking services.
Visa Interactive will also offer development software from Edify Corp. that will enable banks to build customized middleware systems for home-banking functions that can be accessed from Web browsers as well as telephones and PCs.
Robinson sees the Internet as "just another access channel."
He adds: "Within two years, the Internet as an option will
be as readily available as telephone, TV, or private networks."
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