Online Banking's Cash Machine
Neil Martin wrote in this weekend's Barron's (subscription required) about Digital Insight and how it helps smaller financial institutions "become a full-service financial institution" with its online banking offerings.
What sets Digital apart is its business model, analysts and fund managers say. It's based on recurring revenue anchored by its long-term subscription-like contracts. Most of its rivals simply license their online systems to financial institutions who pay large up-front fees and then fund the needed equipment and staffing to run and maintain the systems out of their own pocket. Even though an increasing number of Digital's clients are providing free online services, including bill pay, to retail customers, they typically pay the software provider per-user or per-transaction fees. On average, that's about $1 per month per user for basic online banking access and another $4 per user for bill-paying -- much of which falls directly to Digital's bottom line.
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