In Microsoft’s Failure, Banks See Opportunity : News analysis: The ill-fated attempt to buy Intuit is a wake-up call for those who’ve been slow to offer electronic banking.
Electronic commerce and banking, a market that so far has been long on promise and short on returns, has gotten a huge shot in the arm from Microsoft Corp.’s ill-fated attempt to acquire personal finance software maker Intuit Inc.
Microsoft’s intention to buy Intuit--an acquisition that would have given Microsoft a dominant position in personal finance software--served as a wake-up call to bankers who had been slow to offer customers electronic banking as a new service.
Fearing the potential of Microsoft to control consumer electronic banking, several banks--including Bank of America, Sanwa Bank California and Union Bank--have announced deals with software companies in recent weeks.
Meanwhile, following Microsoft’s announcement Saturday that it scrapped its $2.4-billion bid for Intuit following a Justice Department antitrust suit to block the deal, both companies are vowing to pursue opportunities in electronic banking and commerce aggressively--as fierce competitors rather than collaborators.
“It sounds like we’re going to compete in a major way,” Intuit Chairman Scott Cook said.
“Everyone’s jockeying for position in electronic commerce and electronic banking service,” Cook added. “This is a nascent business that everyone knows they don’t have figured out. We’ll see what sticks and what doesn’t.”
Today, only about 1% of all banking transactions are believed to be handled using home computers, according to a 1994 Ernst & Young study. But the study--conducted before Microsoft proposed its acquisition of Intuit--projected that that figure will grow to 6% by 1997.
And Ernst & Young said that the core users of electronic banking will be the wealthy, customers that banks certainly don’t want to lose.
During merger negotiations, Microsoft Chairman Bill Gates warned Cook that if he opposed the deal, Microsoft was prepared to invest into Microsoft’s personal finance program called Money the funds that Gates would have spent buying Intuit--at that time a little more than a $1 billion.
Today, Microsoft Money is a distant second to Intuit in the market for personal finance software, with an estimated 20% share. Intuit’s Quicken has about 70% of the market.
Even so, no one underestimates Microsoft, a relentless competitor, particularly in markets that Gates deems a high priority--such as electronic commerce.
On May 11, BankAmerica Corp. and NationsBank Corp., the country’s second- and fourth-largest banking companies, announced their plans to jointly purchase Meca Software Inc., creator of Managing Your Money, for $35 million.
Last week, Sanwa Bank California and Union Bank, both based in San Francisco, confirmed that they and 10 other banks were forming an alliance with Intuit to offer home-banking services using Quicken. Other members of the consortium include First Chicago Corp. and U.S. Bancorp of Portland, Ore.
Other banks, including Wells Fargo, are beginning to offer access to account balances and other information over the Internet.
Microsoft had ambitious plans for Quicken. It was expected that Quicken would have been incorporated into Microsoft’s newest version of Windows, exposing the product to millions of new customers. At the same time that it introduces Windows 95 in August, Microsoft will debut the Microsoft Network, an on-line service to compete against America Online, Prodigy and CompuServe.
With Quicken and the Microsoft Network, the PC software giant would have two key pieces allowing it to control electronic banking and commerce. In theory, it would allow Microsoft to collect fees every time a transaction was conducted using its software. That scheme would relegate banks to the people who count money behind a locked door, largely invisible to customers.
Now Microsoft will make a slight alteration in its course. Gates told reporters Saturday that the company is putting the finishing touches on Money 4.0, which he said will be a dramatically revamped version of the package.
Meanwhile, Microsoft’s potential rivals in on-line services aren’t standing idle. America Online is expected to announce today alliances with several software makers--said to include Novell Inc., educational software provider Broderbund and PC game maker Maxis--as an answer to the growing number of deals Microsoft has landed for its service with key content providers such as NBC and Home Shopping Network.
Times staff writer Thomas S. Mulligan contributed to this story.
