Pub. 8 2019 Issue 4

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 20 Core System Strategy: The Era of the ‘Big Bets’ Bob Roth & Brian Hagan Welcome to the sleepy world of core banking systems. Nothing to see here folks—just keep on walking. The banking industry has become accustomed to baby steps in core systems development, with a truly new product rolling out only once every few years. And when it comes to adoption of new technology, progress is measured in dog years. However, a new era of core systems competition is about to begin, with almost everything on the table for change. Given the fierce pressure for banks to become tech-driven companies, perhaps we have reached a tipping point. Consider these recent vendor activities: • FIS partnered with Zenmonics and is standing down on development of its digital solutions. Rebranded as Digital One, it is being positioned as a game-changer to solve the digital needs of hundreds of banks. All FIS cores will eventually be integrated to it. At the same time, FIS is developing its core of the future based on its Profile Core. Bankers who drink the Kool-Aid will be switched to a new digital system and eventually a new core through a “mass enablement” button. Some would say it happens “automagically.” Cool vision, for sure, but bankers have become wary of promises and will demand execution.. • Fiserv bought OBS for Cash Management and Architect for Consumer Online Banking and then merged with First Data for card services. Talk about an overhaul of customer-facing channels. All Fiserv Core customers will be courted to migrate to theses platforms. Given the tepid solutions Fiserv previously offered, customers are lining up and project queues are growing. These were smart product moves and now the proof comes in delivering truly integrated solutions. • Jack Henry acquired Banno for Consumer Online Banking and developed the new JHA Treasury Management platform in house. It also inked a 10-year deal with PSCU for card services. Jack is working hard to stay with the times. The core system is solid and now hundreds of clients will get converted to these new platforms. The lines have formed and the conversions are happening. Cornerstone hopes this momentum continues and these product offerings mature effectively. • The Sanchez team is at it again and working with Live Oak to develop the new FinXact core, which will be integrated with the Apiture digital suite. The American Bankers Association is giving voice and support to the disruption. Along with funding by Live Oak, this deal has strong talent and lots of supporters. Bankers need to be patient, however, and understand how long it takes to evolve and iterate a complex, feature-rich banking system. • Coming out of their initial U.S. deployments, international players Temenos and Tata have some targets lined up that are more mainstream than the large bank and digital bank deployments thus far. So a banker can finally see some due diligence, get a handle on what it would cost to move to these core systems, and pass muster on regulatory compliance. Having new players in town is good. Core is now table talk in the mid-size banking space. The days of one-stop shopping by banks appear to be dissipating, and CIOs now view their payments, digital, lending, CRM and analytics vendors as critical as the core. If we are lucky, technology costs will move from a tax on the organization to more of an investment in competitiveness to take on the big boys. Despite the strategic urgency of technology in banking, the majority of bank executives are not using their economic power to help drive positive industry change. A recent Cornerstone survey revealed that 65% of banks and credit unions auto-renew their contracts without giving much (if any) consideration to goings-on in Vendor World. That 65% will eventually get a knock at the door from one or more of the aforementioned vendors. Bank executives are going to be exposed to other options, even if from their own vendors. JUNE 18, 2019 © Cornerstone Advisors, Inc Follow Us: @gonzobanker www.crnrstone.com CORE SYSTEM STRATEGY: THE ERA OF THE “BIG BETS” By Bob Roth & Brian Hagan WELCOME TO THE SLEEPY WORLD OF CORE BANKING SYSTEMS. NOTHING TO SEE HERE FOLKS – JUST KEEP ON WALKING T he banking industry has become accustomed to baby steps in core syste s development, with a truly new product rolling out only once every few years. And when it comes to adoption of new technology, progress is measured in dog years. However, a new era of core systems competition is about to begin, with almost everything on the table for change. Given the fierc pressure for banks to be ome t ch-driven companies, perhaps we have reached a tipping point. Consider these recent vendor activities: • FIS partnered with Z monics an is standing down on development of its digital solutions. Rebranded as Digital One, it is being positioned as a game-changer to solve the digital needs of hundred of banks. All FIS cores will eventually be integrated to it. At the same time, FIS is developing its core of the future based on its Profile Core. Bankers who drink the Kool-Aid will be switched to a new digi al system and eventually a ew core through a “mass enablement” button. Some would say it happens “automagically.” Cool vision, for sure, but bankers have become wary of promises and will demand execution.. • Fiser b ught OBS for Cash Management and Architect for Consumer Online Banking and then merged with First Data for card services. Talk about an overhaul of customer- facing channels. All Fiserv Core customers will be courted to migrate to these platforms. Given the tepid solutions Fiserv previously offered, customers are lining up and project queues are growing. These were smart product moves and now the proof comes in delivering truly integrated solutions. • Jack Henry acquired B no for Consumer Online Banking and developed the new JHA Treasury Manageme t platform in house. It also inked a 10-year deal with PSCU for card services. Jack is working hard to stay with the times. The core system is solid and now hundreds of clients will get converted to these new platforms. The lines have formed and the conversions are happening. Cornerstone hopes this momentum continues and these product offerings mature effectively.