16 August 2017
M. Arthur Gillis

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M. Arthur Gillis - Computer Based Solutions, Inc.

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The Integrated Core System is Now Real

30 December 2013  |  2078 views  |  0

Thirty-five years ago, core system vendors sold only core systems (all deposits, all loans, customer data and bank financials).  Today, core vendors sell, on average, an additional 18 ancillary applications to a bank or credit union every time they sell a core system.  The nice thing about that is everyone wins.  Vendors love the huge increase in revenue (ancillaries represent as much as 75% of the contract price of the sale).  Banks and credit unions love the integration, dealing with one vendor, easier training of new employees, and the cross-talk of applications that share common disciplines.  Why even ancillary vendors who earned the distinction of best-of-breed do well because a good core vendor will interface the choice of popular ancillaries if it means clinching a multi-million dollar sale.  But please note that interface is not elegant.  Integration is.  There's always a concession when technology is compromised.
A complete banking system consists of 184 applications.  Thirty-eight of them are core.  The rest are part of 23 categories of solutions.  In 2012, the most popular solutions sold by Fiserv, Jack Henry and D+H included no surprises.  I'll name just one - Mobile Banking, as if you hadn't heard.  Thirty-four other applications hit the charts as most-sold, thus accounting for the game-change in recent years.  While core system sales have been leveling off, ancillaries are at the top of their game.
Any core vendor that doesn't also own a robust list of ancillary offerings will be left out in the cold.  The name of the game these days is complete integration and only a handful of the 29 global core companies has the goods to play.  And by the way, banks and credit unions don't just buy integrated ancillaries as a package.  If they say, "We'll take your ancillaries, but we have our own core."  The answer will be, "Adios."  That's like going to the dog pound and taking the tail but not the dog. 
In the early days of bank automation, several ancillary applications were considered discretionary by tightwad bankers.  Today, there's no better bank tech salesman or ROI justification than the likes of a present-day Target default whose tech vaults can't keep the interlopers from getting in.  The London Whale also had a nice impact on risk management system sales.  Finally, Congress has been the best salesman for tech solutions with Dodd-Frank.  Of the 34 hot apps sold in 2012, 39% were of the safe and sound variety.  With events like these, one can justly conclude that the business of technology in banking is healthy, busy, and profitable.  For the good of the order, let's hope not too healthy, busy, and profitable.  Crime should never be a good thing.
It's becoming increasingly clear that banks and credit unions cannot live by core alone.  And an integrated bank system is very appealing now that the crooks have become smarter and more abundant than the tech vault keepers. 
What's in your data security process?
 

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