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International vendors on alert as US banks rethink core platform strategies

18 December 2014  |  7537 views  |  0 US flag

Consolidation among domestic vendors of core banking products in North America has created a rare opportunity for international players such as Temenos, Infosys, and TCS to establish a toehold in a market forecast to be worth $3.3 billion by 2017, according to a report by Celent.

International vendors have been eyeing the US market for years, investing significantly in the hope of establishing a beachhead in the competitive and very large US market for core banking systems.

Celent estimates the North American (US and Canada) core banking market to generate revenue of $2.9 billion in 2013. It should grow at 3.7% annually, reaching $3.3 billion in 2017, says the analyst house.

While core banking system technology has remained more or less in its current form for at least 20 years, predictions regarding the widespread replacement of these legacy systems have for the most part remained unfulfilled for more than 10 years, as banks cling on to the patchwork of systems that run their most vital operations.

However, change is in the air, says Celent senior analyst James O'Neill, as the dawn of a new era in digital banking makes large banks think again about modernisation.

“Consolidation among domestic vendors has reduced development resources for some legacy core banking platforms, creating a market opportunity for international vendors," says O'Neill. "The banking market in the US is steadily approaching a watershed period for core transformation."

The market is large, lucrative, and growing, he says, but cautions that many of the opportunities will likely initially come from selling ancillary products rather than the core.

Concludes O'Neill: “Since very few major bank core modernisation projects are performed in a ‘Big Bang’ fashion, it’s less about ‘when’ core system transformation will arrive, and more about what form core modernisation will take.”

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