While the eBanking boom allowed specialist vendors to thrive, the market has now changed significantly. Many leading distribution IT infrastructure vendors are having to move towards a diversified model, offering infrastructure for eBanking, phone banking and branch banking. If smaller vendors cannot establish critical mass rapidly, they are likely to go under.
New research has found that banking distribution IT vendors need to widen their product offerings.
Datamonitor’s new report Global eFinancial Services and distribution channel vendors: approaching the end-game finds that as growth in retail eBanking starts to stagnate, it is critical for distribution channel vendors to reposition themselves as enterprise CRM players, with expertise across the branch, call center and Internet channels.
Distribution channel technology vendors will have to demonstrate best-of-breed capability and as broad an offering as possible to survive the likely shakeout in the vendor market.
eBanking specialist vendors once had all the momentum in the distribution channel application market – particularly in the US, where banks rushed to implement eBanking applications and get a strong online proposition running. This allowed vendors such as Corillian, S1 and Financial Fusion to build strong reputations as eBanking leaders.
But the economy has been holding eBanking technology spending back, with growth in Europe slowing to 6% in 2001-02 from 36% in 2000-01. More and more banks are looking to derive value from an integrated multichannel distribution strategy, limiting the opportunities for technology vendors that cannot move beyond a single channel.
So distribution channel vendors must reposition themselves as enterprise CRM players, with expertise across the branch, call center and Internet channels. Alternatively, eFinancial Services vendors need to branch out beyond retail eBanking and move into higher-growth lines of business, such as eSME banking and eCapital markets. As vendors seek to broaden their application portfolios in this way, strategic acquisitions are likely to be a popular option, especially for vendors with large cash reserves from IPOs or capital investment.
S1 is a good example of a company following this strategy. Its recent acquisition of niche CRM player Point complements its acquisition of Software Dynamics last year, which gave it much-needed branch capability. S1 was once narrowly Internet-focused – but if it can integrate these acquisitions effectively, it will become a financial services-focused version of Siebel, with a truly multichannel product set.
Related research: Datamonitor, 2002: Global eFinancial Services and distribution channel vendors: approaching the end-game