Intuit's financial services focus expands

Implications: Intuit's recent purchase of Digital Insight, immediately made them a player in the online banking vendor space.

In this fast growing area, there are about a dozen significant competitors, without clear leaders.

For online banking services, large corporates are served by the major banks like Mellon and Bank of America.  On the consumer side, banks offer online banking for competitive reasons and to drive customers to use less costly transactions.

There is a large under-served market with small and medium business (SMB) that represent a very profitable area for banks to gain valuable deposits transaction fees.  Combining Intuit's expertise and name recognition with SMBs, with Digital Insight's online banking base, could help them become a leader in this under-served market.

Analysis: Intuit has been the most successful software and technology services provider focused on the financial management needs of small and medium businesses.  They have demonstrated that they understand the market and know what they should and should not be doing.  If they had any notion of becoming an online bank themselves, they quickly figured out that it is a very different business from software and technology services.

Digital Insight has been successful being very focused on online banking services.  This is a crowded field but their reputation as an innovative, reliable leader is well established.

Intuit's acquisition of Digital Insight and these new product announcements are particularly interesting because they represent an opportunity for banks to expand their service offerings and integration with their SMB customers.

Banks are looking for more deposits and transaction fees.  SMBs do not have the same financial technical infrastructures as their larger corporate competitors, and are far behind with their capability to manager their finances with advanced technology.

Banks that can reach out to this market and have their SMB customers more integrated (and reliant) on the services provided will become more loyal and profitable customers.  In turn, Intuit can become a leader in providing these technology solutions to banks as very high margins.