HARDWARE/ SOFTWARE

Banker's Gold

Software Firm Finds Niche Serving Community Banks

BY DANIALLE WEAVER

Bankers, no matter what size institution they work for, have always predicted that a number of smaller, community banks will survive despite the industry's continuing consolidation. That's because certain customers like having the bank's president greet them by name. Historically, however, patronizing small banks also meant hassles for customers, who would have to wait for - or even forgo-conveniences like direct payroll deposits, ATM machines and PC banking.

These days, however, banks with fewer than $1 billion in assets can be high-tech as well as high-touch, thanks to Goldleaf Technologies, an eight-year-old software company whose sales operations are based in Lake Mary, just north of Orlando. For about $100,000, community banks can now purchase an integrated software package that runs on one PC that allows them to offer five separate types of electronic banking services that are every bit as good as those offered by larger rivals.

And just in time, too. That's because the folks at Intuit, Microsoft, CheckFree, Fidelity and Schwab - not to mention First Virtual, Online Resources and Cybercash - are hoping to offer those services first, thus shutting the banks out. And banks cannot afford to sit idly by while that happens, because the customers who are most interested in so-called direct banking services also happen to be a bank's most profitable customers, according to David Peterson, Goldleaf's President and CEO.

In fact, only about 75 of the nation's largest banks now offer PC banking, and only a handful are Internet-based, according to Mentis Corp., a Durham, N.C-based research firm. Only about 4 percent of the nation's 9,000 community banks - banks with assets of fewer than $1 billion - currently provide PC banking, although 79 percent expect to do so within five years, according to Chicago's Grant Thornton. Of 612 banks surveyed in November 1996, 21 percent already had Web sites, but only a quarter of those expect transactions to be conducted there.

The market for direct banking services - whether those services come from a traditional bank or not - is certainly no mirage, says Peterson, a 36-year-old West Palm Beach native.

"This is an anti-mirage," he explains. "A mirage is not real - you can see it, but it's not there. Demand for this product is very real, and it's there but you can't see it. It's like a community of 10,000 people, and 10 miles outside town they're building a huge [residential] development for 3,000 or 4,000 people. The [bank's] board of directors is looking at that and thinking they should open a branch near there."

Consumer demand is already strong, according to an October 1996 survey by Jupiter Communications and FIND/SVP, which found 9.2 million households nationwide using on-line or Internet-based financial services. The study a found "a solid willingness to pay about $10 a month for remote banking services. Not surprisingly, there are a host of products already available from a variety of competitors, but the closest competition Goldleaf has right now is Regency Voice Systems of Dallas.

For banks, the key to survival will be dominating the electronic payment system, Gary Meshell, director of Price Waterhouse's Electronic Financial Services Group, told a Bank Administration Institute direct banking conference in New Orleans recently.

That way, banks "can gather customer transactional data and pitch bank-branded, customized bundles of banking, credit, mortgage, insurance, investment, e-commerce and other financial products as well as collect transaction fees. The real 'holy grail' of e-commerce and payments is understanding consumer behavior, analyzing that behavior and using technology derived from payment information to push products out to customers."

Peterson is certainly optimistic about prospects for Goldleaf's product, called CustomerLink. CustomerLink is an integrated software package that includes five modules. Along with Internet banking, telephone banking and PC home banking, the modules encompass automated clearinghouse (ACH) origination, for services like direct deposit of payroll checks and cash management, which allows corporate customers with 24-hour access to their accounts via PC.

"Within the next 18 to 24 months, I expect 85 percent of the banks with $1 billion in assets or under will purchase software that allows them to provide phone, home or Internet banking services," says Peterson.

One of CustomerLink's biggest selling points is that it comes with a two-week training course, technical support and pre-written marketing and PR materials that the banks-who are notoriously bad marketers-can personalize with their names. As a result, Goldleaf's sales nearly doubled last year, from $2.8 million in 1995 to $5 million in 1996. Projections for next year show $6 million in sales, primarily because Goldleaf's 70 employees will be preoccupied with "a huge push in the second part of the year" to roll out a new product, he says. Once that occurs, year-over-year growth should average 20 to 30 percent, he says.

The company currently counts 1,300 institutions as clients.

However, each of the five software modules can be sold together or separately, and many banks have opted to purchase one or two modules, which range in price from $10,000 (the ACH module) to $40,000 (the Internet module).

For example, First Waco National Bank of Waco, Texas, has purchased the home banking, ACH and cash management modules, while United Southern Bank of Umatilla, located about an hour north of Orlando, opted for just the ACH software. "I love it," says Tina Stoneking, an assistant vice president of the Lake County bank. "It's easy to use, and I can't say enough about the technical support staff. I really feel like I get personalized service."

That is music to the ears of Peterson, who began his career in 1983 at Orlando's Kirchman Corp. In 1986, he moved on to Charlotte's Broadway & Seymour, then founded his own company, Legend Technologies, which marketed "TREEV," an optical disk storage software product for banks.

In 1989, Peterson got fed up with life on the road, so he pulled up stakes for a job as vice president of operations for the Commercial Banking Company in Hahira (HAY-high-rah), Georgia. In the process, he took what he describes as a 75 percent pay cut.

Peterson's main responsibility at the bank was to increase the capacity of its automation systems. Other independent banks got word of his work and asked Peterson to develop programs for their banks, too. So the bank's holding company, Lowndes Bancshares, created a subsidiary company to supply the software.

And Goldleaf Technologies was born. Now, however, Peterson and his growing company are starting to chafe at life in Hahira, population 1,300. He is currently scouting potential new corporate sites in Florida, Georgia, Tennessee and North Carolina. Also on the list: Lake Mary, or maybe even Sanford, a little further north.

Wherever Goldleaf lands, it must be close to a city like Orlando or Nashville or Charlotte for two reasons. One is to tap a larger talent pool. The other is that the company's founder wants to be far enough away to have horses and a 20-acre spread.

"We're looking to our future as a growing and dynamic software company, and quality of life issues for us are very, very strong," Peterson says. "Those are the choices we all make."