When Integrion was formed in 1996 to help banks get online quickly and cheaply, industry pundits noted that the combination of 18 banks and IBM hardly sounded like a recipe for speed. But now Integrion and its chair, William Fenimore, are coming under fire for moving too slowly, and analysts said that the group's recent call for more money is just making matters worse.
The banks already have put up about $80m (£48.78m), and IBM has contributed between $5m (£3.05m) and $10m, plus a substantial amount of sweat equity. "Investors are pushing back because of a lack of progress and a lack of return on their initial investment," said Scott Smith, director of Internet business strategies at Current Analysis.
By the end of 1998, Integrion was supposed to have about 1 million people using its services. Today it said it has about 807,000, although fully half of those come from Visa Interactive, which Integrion bought in 1997. "The rollouts have taken longer than they'd originally planned," said Brian Maimone, a senior analyst at Furman Selz. "The pilots have taken longer, and the functionality wasn't as strong as originally hoped." Five banks now use Integrion's services to offer online banking. Even though a restructuring is likely, Integrion denies it is in trouble. "We're going to be a player going forward and we're going to be a strong player," said Emily Mendell, a manager of planning at Integrion. She said, however, the group is considering "making some revisions."
Some of the advantages Integrion claimed have declined in importance since its formation. In 1996, banks worried that Intuit or Microsoft, via their personal financial management software, would steal their customer relationships and did not want to rely on them for home banking services. IBM seemed like a relatively safe vendor to work with. "I always viewed Integrion as a political organisation. The banks wanted a way to push back at Microsoft, Intuit and CheckFree," Smith said. But those organisations, he added, are no longer so threatening.
Integrion also promised to keep banks in the payment loop, again "protecting" them from nonbanks. But Integrion bought Visa Interactive, another bank consortium with its own payment system. Then it outsourced Visa Interactive's bill payment functions to CheckFree and is migrating Visa Interactive's customers onto the Integrion platform. "That doesn't sound like protecting the bank's franchise over the payment system from nonbanks," said Richard Crone, vice president and general manager at CyberCash. "I'm not saying it was a bad decision. Just counter to the original charter."
Because IBM backed Integrion, banks also could let their customers use IBM's global network to access them, which would be more secure than a public network. Not only did IBM recently sell that network, but banks have become more comfortable with the Internet.
Integrion's fate remains unclear. Banks that want more control over functionality and timeliness could pay up for a larger stake in the venture. IBM, which doesn't have a ready-made online banking product, could buy out the banks and bring the technology in-house. Some Integrion members are clearly hedging their bets: Citibank, for example, also is a part owner of Transpoint, a Microsoft-backed bill presentment venture.
Because online banking and bill presentment are such emerging fields, Maimone said, "banks want to make sure they don't have all their investment in one model."