Automation in US banking – part 2
Art Gillis: the dynamics of total number of customers by vendor hasn’t changed much in the past five years
Art Gillis, a seasoned banking technology consultant (working in the computer industry since 1958 – and listed as a top 25 tech consultant by the American Banker) and author, presents his latest “Automation in Banking” report (#31!), which looks at the US core banking and ancillary software market.
This is part two of a two-part article. Click here to read part one.
- Increases in number of employees is an interesting metric because it is never the same companies that hit the chart.
In 2015, the list included Wolters Kluwer, D3, FIS/Sungard, Q2, Malauzai, and TSYS, all had double digit growth rates.
Added were Vantiv, Fiserv, Jack Henry and First Data with single digit growth rates.
- There are four exhibits (maybe more) in the report that display data that define vendor accomplishments:
1) employee growth rate;
2) consistent revenue strength;
3) products development;
4) strong sales of hot apps that bankers need, want and buy.
Combining the four exhibits, one can see the same names taking a bow: Wolters Kluwer, D3, Q2, Malauzai, TSYS, Vantiv, Fiserv, and Jack Henry.
- The dynamics of total number of financial institution customers by vendor hasn’t changed much in the past five years.
The number for the group of top five is stuck at 57,000. I don’t know a better number, but I’d just like to see it grow.
- The top tier of US banks (155 of them) spends $99.7 billion per year to drive their IT operations.
That’s 87% of what 12,364 financial institutions spend. Big matters, but three of the top five serve mostly small to mid-tier entities. FIS serves large banks, but its organic revenue growth was lower than that of Fiserv and Jack Henry.
- The revenue per employee ratio among banking technology vendors has increased in the past few years.
Five years ago it was 200,000. In 2015 is was 250,000. The range is odd – a low of 107,000 and a high of 903,000. The answer is in the details, not the math.
- The stock market was kind to the eight public companies in this report.
From 2014 to 2015, VNTV, FISV, CSVI, TSS, ACIW, JKHY, FIS and CATM made it to the chart. The range of appreciation was 100% to 7%.
- Open architecture systems now represent 16% of the US financial institution population.
Nine companies provide open cores. Fiserv is the largest with 750 customers. Its acquired DNA product is a winner.
- Four IT solutions companies entered the report for the first time.
They were not start-ups. Careful is what I would call them. Baker Hill, CPI Card Group, Paragon Application Systems and Urban FT.
- There’s an interesting exhibit in the report that was not my idea.
The investor community asked, “What are the factors that add revenue growth, and what causes revenue decline?” I accepted the challenge and put together a list of 15 things that increase revenue, and 13 that reduce revenue.
- A good rule to follow when reading “Automation in Banking” is to look for anomalies.
For example, platform automation (PA) is a 33-year-old technology that no pundit ever raves about today. So why did Fiserv, Jack Henry and its ProfitStars division break the mold in the 2015 edition with 35 branded solutions in the PA section of the report?
The easy answer is every banking technology turns on only after the customer does the onboarding thing. And there are new ways to onboard.
Start-ups, disruptors and newbies don’t see what the pros live with every day of the 45-year span of automation in banking. Seasoned vendors own the 50-yard line seats.
- There are some bright spots in the business that show up in the report as “hot apps”.
Fiserv and Jack Henry take credit for telling us what they are. Call centre, branch alternatives, workflow, non-technical system customisation, smartphone apps, mobile banking, bill pay, bill presentment, IT infrastructure outsourcing, commercial lending, digital marketed marketing, invoicing, pricing the customer relationship, core processing, debit and credit card services, enterprise content management, all things online, peer-to-peer (P2P) solutions, print production and source capture solutions.
These are the real things vendors sell, and in the case of Fiserv and Jack Henry, it’s likely the CFOs sent them in. They count revenue dollars and know the meaning of hot apps.
