Metavante (Milwaukee) processes more than 17 million deposit accounts at its data center, using an IBM MVS mainframe in a Sun Microsystems OpenServer environment. But about half of the financial institutions in the U.S. market seek in-house core banking solutions, notes Frank R. Martire, CEO of Metavante. That's why Metavante recently bought Kirchman Corp. (Orlando, Fla.), whose core banking systems are used by more than 1,000 financial institutions in the U.S., the Czech Republic and the Philippines. Kirchman will operate as an independent unit of Metavante; financial terms were not disclosed.
By adding Kirchman Bankway, its in-house core banking product, to Metavante's outsourced offerings in core banking, EBPP, card processing and card personalization, the combined organization can address both sides of the market.
Usually, the preference for in-house core processing comes up early in discussions with new and potential clients. "Institutions who want to be in-house like to have control of their environment," says Paul A. Danola, executive vice president and group executive, Metavante Financial Services Group.
"Effectively, they can design on the dime," says Danola. "If they want to create another product, they can do that in their own in-house environment."
Still, other facets of a bank's technology footprint may be better suited for an outsourced solution. "If they want to be in-house for the core, they realize in some of the other areas [that] it's way too expensive to start their own EBPP operation or card processing operation," says Metavante's Martire. "So they say, 'OK, we just need to integrate those product lines with our core processing.' That's the capability we talk about with our cross-sell."
Metavante will also offer Kirchman's regulatory compliance service to its current customers. The key element for the cross-selling initiative will be the integration of the various components. "Integration of product lines is very important to banks," says Martire. "It's a major differentiator in the marketplace."
Citizens Bank (Providence, R.I.; $30 billion in assets) took advantage of vendor consolidation to achieve painless integration between its core processing and teller systems. After Fidelity Information Services, a division of Fidelity National Financial Inc. (FNF; Jacksonville, Fla.), purchased WebTone Technologies last year, the vendor integrated WebTone's TouchPoint teller system into its core banking platform. Since Citizens had been a customer of both vendors, it gained well-integrated systems without lifting a finger.
The WebTone acquisition was one in a series of vendor deals FNF has inked recently. Already this year it has purchased Aurum Technology, Sanchez Computer Associates and Bankware.
Integration is part of the pitch with a banking software suite. "The assumption of the integration responsibility and risk goes to the vendor," says Frank Sanchez, president of product development for Fidelity Information Services (and CEO of Sanchez Computer Associates prior to the merger). "Instead of the bank having significant staff, or outsourcing to an expensive service organization, we as the vendor are integrating it ourselves."
But FNF has stiff competition in the integration game - within the banks themselves. Most top-tier banks have in-house systems with a strong homegrown component. That's why Ernest Smith, president of Fidelity Information Services and co-COO of FNF, considers in-house developers to be his strongest competition and most important customers. "The larger the bank, the more likely that they'll have some smart people there who feel that they can do it just as well in-house and have more control over the environment," says Smith. "I look at those people as the customers that I have to satisfy."
But do-it-yourselfers have to ask themselves some hard questions: "Do they really need to be software development shops? Is that part of their value proposition as a bank?" asks Sanchez. "Or are they better off financially, and from a technology risk perspective, outsourcing to a company like Fidelity, or acquiring technology from a company like Fidelity that's leveraging its costs across the marketplace?"