Intuit to Purchase Digital Insight

Last Thursday, financial management software developer Intuit announced plans to acquire online banking solutions provider Digital Insight in a deal worth $1.35 billion.

The merger came as somewhat of a surprise to industry insiders. However, when they reflect upon it, all agreed that the deal "makes sense." The amalgam of Intuit and Digital Insight will create a viable competitor and new services provider in this space, offering both companies an entre into customer segments they had difficulty exploring on their own.

"By partnering with an online banking provider, we will create solutions that are better for small businesses and consumers. This will create value for them and help our growth too," said Steve Bennett, president and CEO of Intuit, during a teleconference last week.

The real synergies of the marriage will come in a product set that offers Intuit's personal financial management software packaged with Digital Insight's online banking solutions. According to George Tubin, a senior analyst with TowerGroup, the trend in the industry is to provide consumers with more features to help them manage their finances online. "Intuit invented this," he comments. "I'm surprised they weren't playing a bigger role. But now they figured the time was right. With Digital Insight, Inuit will help banks implement personal financial management solutions in a way that is simple for consumers. [Intuit's] Quicken is very user-friendly."

Maggie Scarborough, a research manager with Financial Insights, also sees these same benefits applied to banks' small business customers in the form of business financial management tools. Scarborough maintains that this deal is ultimately about small business. "The No. 1 priority of north American banks on the business side is to drive revenue," she says. "This [deal] is certainly the way to do that. Digital Insight is the mediator between the small businesses and the banks, and Intuit owns the desktops. There are still millions of businesses out there not using Quicken or QuickBooks."

Bob Meara, a senior analyst with Celent, agrees that small businesses are at the center of this move. "The larger scope excitement here is for small business solutions," Meara says. "Internet banking has reached its peak for acquiring new customers. Banks are focusing anew on small business. Either they're taking their cash management solutions and dumbing them down or they're adding things to their consumer solutions. This deal will create a best-of-breed application focused on small business. There's a goldmine for banks to get business customers to more fully utilize online resources because the cost of the services is so low."

Digital Insight's Jeff Stiefler, chairman, president and CEO, told BS&T in an interview that the deal will help financial institutions to "further penetrate into a very large market of nonconsumers. The proprietary capabilities we'll have together will give banks that work with us an advantage over those that don't."