With a promise to create new types of online banking services, financial software vendor Intuit has agreed to buy financial services provider Digital Insight for US$1.35 billion in cash.

Intuit makes the Quicken and QuickBooks financial management software, while Digital Insight provides outsourced Internet banking services to thousands of financial institutions.

The companies will build closer ties between the workflows in Intuit’s software and the services from Digital Insight, in a bid to make banking online better for consumers and small businesses, they said in announcing the deal on Thursday.

"The next generation of online banking will give a more personalized and intelligent user experience that looks more like Amazon or eBay than most financial institutions do today," said Jeff Stiefler, Digital Insight’s chairman, president and chief executive officer, in a conference call.

Through the deal, Intuit hopes to grow its revenue by persuading more banks to outsource their online banking services instead of building their own, said Steve Bennett, Intuit president and chief executive officer.

Intuit has agreed to pay $39 in cash for each share in Digital Insight, a premium over its closing share price of $33 on the Nasdaq stock market Wednesday.

The companies together will serve close to 5,000 financial institutions, 25 million consumers and 7 million small businesses, they said.

Digital Insight will continue to operate from its facilities in California and Georgia. Its business will be part of a new financial institutions business division within Intuit, with Stiefler serving as its president.

The companies expect to close the deal in the first quarter next year, subject to regulatory review, the approval of Digital Insight shareholders and other closing conditions.

Digital Insight grew its revenue by 16 percent in the third quarter of 2006, to $61.9 million, although it reported a loss on a generally accepted accounting principles basis, of $0.76 per share, including expenses related to stock options and a large impairment charge.

-James Niccolai, IDG News Service (Paris Bureau)

Check out our CIO News Alerts and Tech Informer pages for more updated news coverage.