By Art Gillis

First some definitions, because you won’t find them in Webster’s. There are hundreds of companies that sell IT solutions to banks, thrifts and credit unions. I focus on 70 because they supply core processing and several critical peripheral applications. Core processing apps include all deposit systems and all loan systems. They represent about 70 percent to 80 percent of what any financial institution does, from a de novo to Citi. Because these apps are integrated, it’s necessary to include general ledger and customer database as part of core applications. So if I had to justify why I pay so much attention to core processing companies, I’d say it this way: “They can make or break a bank.”

The revenue figures show there are six companies that have prominent positions as tech providers. The 7th, 8th and 9th companies are good companies, but they don’t come close to the sixth in revenue. Achieving high revenues did not happen by organic growth alone. Acquisitions played a major role. Here are the stats for the past 12 years:

Fiserv (FISV) 88
Metavante (part of MI) 26
Jack Henry & Associates (JKHY) 26
Open Solutions Inc. (private) 15
Fidelity National Information Services (FIS) 9
Harland Financial Solutions (now part of JH with a serious proposal by MFW to acquire JH) 9

Sometimes, stats are very friendly in explaining differences. The first three companies have been in business for 22, 40 and 30 years, respectively. The second group of three companies has been in business for 15, 4 and 6 years. Fiserv has made more than 145 acquisitions in its lifetime. Even though Open Solutions is technically 15 years old, I consider it a seven-year-old company after it was reborn with the arrival of the current CEO. Fidelity reached an annual run rate of $4.2 billion in four years, relying largely on the acquisition of independent companies. Hidden in all these stats is the fact that some of the acquired companies had made their own acquisitions, so if those numbers were added to the above, the impact of acquisitions would be even greater.

For what it’s worth, I see no end to the M&A activity, and I even see activity within the six. And I didn’t get my vision from the possible merger of GM and Chrysler.

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