<p>Calabasas, California-based Digital Insight, which expects revenue this year to rise at least 13% to $240m, operates an on-demand service, providing a hub to enable banks and credit unions to deal online with their retail and commercial customers. By integrating its QuickBooks commercial software and Quicken small business and personal financial software with online banking, Intuit aims to expand the functionality of its offerings.<br /><br />Intuit CEO Steve Bennett believes the deal will increase both companies&#0039; growth rates and dramatically improve the capability and ease of use online banking. He said they aimed to change the game in online banking. <br /><br />We aim to build a business case where outsourcing to Intuit is a better solution and generates more value than what financial institutions can build or license themselves, he said on a conference call.<br /><br />Digital Insight CEO Jeff Stiefler said that while online banking was growing rapidly, today&#0039;s systems didn&#0039;t meet the needs of most small businesses and many consumers. Together with Intuit, the firm could build a next generation online banking system that would be characterized by a personalized, intelligent user experience that looked and felt much more like Amazon or eBay than today&#0039;s financial institutions.<br /><br />Together the companies claim to serve more than 5,000 financial institutions, nearly 25 million consumers and nearly seven million small businesses. A big attraction for Intuit is that online banking is still in its infancy, though it has been growing rapidly. While Digital Insight provides outsourced banking services to 1,760 financial institutions with 38 million customers, just seven million customers use the online banking service, 19% penetration, and 1.7 million pay their bills online, only 5% penetration.<br /><br />Digital Insight&#0039;s 10-K annual filing quotes Jupiter Research as forecasting that the number of US households that will bank online will grow from 38 million in 2005 to 55 million by 2010. It says Forrester Research predicts that the number of households paying bills online at a bank web site will double from 15 million in 2005 to 30 million in 2010.<br /><br />Intuit has been looking for some time about the 22 million really small businesses, typically with under $100,000 annual revenue, why were over-serviced by its software and were still using a pencil and paper or Excel to manage their finances. But they did have a relationship with a financial institution and it began talks about nine months ago with Digital Insight about how it could use this relationship.<br /><br />While financial institutions online presence was sufficient for accountants at bigger companies, it was typically clunky and for small businesses or individuals only looked back on balances and did not have the ability of Intuit&#0039;s software to predict future cash flows. It was from these talks with Digital Insight that the acquisition came about and new products integrating their software are planned shortly.<br /><br />Digital Insight, which claims to be the largest company in the online banking market, lists its principle competitors as Online Resources, S1 Corp and FundsXpress and Mountain View, California-based Intuit has been one of the most consistently expanding large software companies and last year revenue grew 15% to $2.3bn with its financial and tax software. Bennett said Digital Insight gave it a significant third growth engine among financial institutions.<br /><br />Intuit is also working on software to enable consumers to handle their healthcare needs and he said it is able to solve important problems well in this area, it has the possibility to create a fourth growth engine.<br /><br />Insight will establish a newly formed financial institutions business division within Intuit, with Stiefler serving as that unit&#0039;s president.<br /><br />Intuit is paying $39 cash for each Digital share. It will raise the money from its $1.2bn reserves and $1bn debt financing. It calculates it will be $0.02 to $0.03 dilutive to earnings before exceptional items in 2007 and slightly accretive in 2008.</p>