Intuit provided news Monday that is straight out of Hollywood: a sequel with a working title of “Digital Insight II.” But as is generally the case with summer blockbusters, questions abound about the likely fate and the implications of this $1 billion spinoff of Intuit Financial Services. What we do know is that this is a classic boy-meets-girl story in which the boy breaks off the relationship by gently telling his former lover, “This isn’t about you, it’s about me.” On paper, Intuit and Digital Insight should have been an ideal match. Intuit has deep pockets, it likes to address the needs of consumers as well as pros, and it has a rich history and understanding of personal finance and how to develop software. It also saw that the future of PFM was in online and mobile banking -- not desktop software like Quicken -- because that’s where everyday consumers go to monitor and manage their everyday finances.

The fact that Intuit intends to use the proceeds of the cash sale to private equity firm Thoma Bravo to boost its short-term stock price is a no-confidence vote in Intuit’s ability to achieve greater longer-term returns in a grinding business in which bankers would prefer a root canal without painkillers over switching online banking platforms. Intuit is a company that pays attention to Wall Street’s needs, and its stock has been lackluster despite the lift from the markets overall. The divestiture buttresses its statement that it is shedding slower-growth businesses that are not at its dual core of small business, and taxes and accounting. Intuit projects the pieces it is selling to Thoma Bravo will ring up $325 million in revenue in fiscal 2013, up less than 6% from the previous year. It is also a reflection of the stiff competition in the market. MoneyDesktop is a leading upstart that has a wow factor and an industry buzz that IFS lacks. That starts with MoneyDesktop’s snappy user interface, but it also extends to questions about who controls the transaction data that will boost the return on investment from PFM technology. MoneyDesktop got a lot of heads nodding at Finovate with the way it said it could enable bankers to use PFM transaction data to target customers. In contrast, I have heard rumblings of dissatisfaction from Intuit clients who complain their ROI is crimped because Intuit is reluctant to share customer data with FIs.

But this also is a story with two lingering questions: Will the breakup be messy? Intuit is sending IFS packing without two prize possessions: Mint and Open Financial Exchange (OFX). The former is the praiseworthy direct-to-consumer PFM start-up that Intuit bought for $170 million. The latter is the touted method of aggregating and categorizing account information. Intuit applied Mint’s lessons about intuitive design to everything from Quicken to IFS’ online-banking and FinanceWorks. There is reason to believe that Intuit will work out an arrangement that gives IFS access to Mint and OFX, but that has yet to be agreed upon. This has the potential to cause clients anxiety attacks. What does the suitor have in mind? The key question is whether Thoma Bravo will lavish more resources on IFS than Intuit did. Despite Intuit’s deep pockets, I suspect some Digital Insight folks perceive the software giant failed to live up to its investment promises. So, the question is, what can Thoma Bravo do to scale the business? I am not familiar with Chicago-based firm, and it has yet to return my call. Its website states it does not invest in “new inventions or technologies” or distressed companies. Rather, it is a buy-and-hold firm that invests in financial services companies and hunts for acquisitions in “fragmented industries” that can trim costs and expand revenues. It usually commits $25 million to “$200 million or more.” (I presume the $1 billion IFS deal falls in the “or more” classification.) “Thoma Bravo’s acquisition of IFS is consistent with our strategy of buying great technology franchises with significant recurring revenue,” managing partner Orlando Bravo said in a statement. To my ear, that sounds like a promise to have and to hold, and to seek cost reductions and steady investment returns.

Author

About Mark Schwanhausser

Mark Schwanhausser is JAVELIN’s Director of Omnichannel Financial Services. Mark strategizes how financial institutions (FIs) can track and serve customers across whatever channels they use, and provide a consistent, integrated brand and user experience. Mark helps banks and credit unions profitably enable customers to monitor and manage their money more intelligently through technology such as online banking, mobile banking, personal finance management, financial alerts, and technologies on the horizon like wearables.

Mark led the development of JAVELIN’s Financial Journey Model, which builds digital banking on a foundation of 10 time-tested personal finance principles, and JAVELIN’s holistic segmentation, which enables FIs to prioritize their investments to serve the critical needs of the profitable Moneyhawks™, high-value Traditionalists, and up-and-coming Emergents. His other work in 2015 has focused on how banks and billers can turn off paper statements by closing the “digital commitment gap,” why digital account opening has reached a tipping point, and how FIs can use alerts and notifications to initiate daily “conversations” with customers.

Before joining JAVELIN in April 2008, Mark worked for nearly 26 years at the San Jose Mercury News, mostly as a personal finance reporter writing about money and emerging trends in financial services and payments technology.

Mark has a bachelor’s degree in journalism from the University of Missouri at Columbia and attended Antioch College.

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