While savings for the bankers will be modest, the move, which takes effect immediately, caps this week's Internet Banking and Brokerage Conference, which Microsoft executives have used to romance hundreds of bankers and brokers assembled in at the company's hometown of Redmond, Washington.
Analysts characterized the decision as a goodwill gesture aimed at convincing banks to support Microsoft Money, and more importantly, to drum up business for Microsoft's Windows NT operating system and raft of other business software products.
Ira Morrow, a research director at Gartner Group said the fee cuts remove a minor point of tension between Microsoft and the banks. At the same time, it reassures bankers that the software maker has no designs on venturing into online services that invade their traditional realm.
"This is a 180-degree turn around for Microsoft," said Morrow, comparing this week's announcements to tension created a few years ago when Microsoft chief executive Bill Gates ruffled feathers by referring the industry as outdated. "Now, the banks are Microsoft's best friend because it wants to sell them a lot of Windows NT."
"It's a clearly overture to the banks," concurred Forrester Research analyst Julio Guzman. "The real hurdle is to convince banks that Microsoft does not pose a competitive threat in the future."
Matt Cone, Microsoft's business development manager for the desktop finance division, characterized the two announcements as a "clear statement" from Microsoft. "We are committed to getting this stuff rapidly deployed and used by consumers. It will make it increasingly attractive for banks to offer online services to allow customer to bank online. "
Cone also conceded that the company "is looking to offer financial institutions with an overall Internet platform," and pointed to related news of new software, code-name Marble, which was announced yesterday at the conference.
The software supports the Open Financial Exchange (OFX) specification, a standard championed by Microsoft and its rivals in online banking, CheckFree and Intuit. OFX, which will be incorporated into new versions of the companies' offerings due in the fall, promises a standard interface that offers a unified pathway between desktops running the client software and bank databases.
Marble is also due this fall and will provide banks running the NT system a tool for building Web sites that let Money users into back-end databases to perform transactions and download account information to their computers, according to Microsoft.
The OFX initiative and Microsoft's announcements this week been have interpreted by analysts as an attempt to spur more rapid deployment and increase the customer base for online banking. While the number of people banking online has grown to more than 1 million in the United States, America's 32 million home computer owners who do their banking the old-fashioned way present a vast potential market, according to analysts.
James Marks, an equity analyst specializing online banking at CS First Boston, said he expects the number to rise dramatically as more banks get wired this year. First Boston expects 70 of the country's largest 100 banks to offer online transactions by the end of 1998.
Gomez quoted Forrester estimates that indicate the number of people banking online will grow from 1.1 million at the close of last year to 9.7 million by the end of 2001.
Microsoft is slugging it out with a slew of competitors for the business. Direct competitors include about a dozen software developers such as Intuit and CheckFree, while Money is also in competition with developers who build online banking applications that work on the Internet and with direct-dial private networks. Still other banks have opted to make their services available through online service providers such as America Online and CompuServe.
Microsoft's Cone said the Money software has an installed base of about 2.5 million, but only about 10 percent, or 250,000 people, actually use the product to check their bank balances and conduct other online transactions. Since Microsoft delivered the first wired version of Money about three years ago, it has collected between 75 cents and $1.50 per customer per month from participating banks.
Microsoft said it has some 80 bank clients currently supporting Money. They will split monthly savings in the ball park of $250,000 dollars, which amounts to little more than a pittance for the industry, analysts pointed out.