Millwaukee-based financial solutions provider Metavante and Temenos Group, the Geneva-based core systems provider, will sell the Temenos core banking solution (TCB) in the U.S. The combination of Temenos' technology and Metavante's strong U.S. distribution network and profile in the U.S. banking market should be a winning combination, say both companies.
According to experts, the core banking systems developed for use outside the U.S. tend to be more robust, especially around international capabilities such as language and currency. As a result, U.S. banks have been somewhat hampered in their global expansion efforts. "There are 30-year-old systems out there, so bankers know they have to change," says Jim Dempster, SVP and CTO of Metavante. "But they just haven't found the right solution yet."
The combined Metavante/Temenos solution will be component-based, allowing banks to move single elements of their existing organization onto the new one, even running the new and old systems in parallel until migration is complete, according to Alex Groenendyk, president of the Americas, Temenos. "This new architecture is so granularly componentized that you can take parts of a solution and replace it over time," he says.
According to Christine Barry, research director with Boston-based Aite Group, this could be the shot in the arm U.S. banks need to finally refresh their core systems. "A core system replacement is often the most expensive and risky IT initiative a bank can take on," she said in a statement. "As a result, most proceed with caution. ... The strategic alliance formed between Metavante and Temenos, a European-based vendor, is likely to push this market forward by combining a cutting-edge, next-generation solution with a strong U.S. brand like Metavante."
In addition, about two weeks after the partnership announcement, it was revealed that Metavante would split from its parent company, Marshall & Ilsley Corp. Warburg Pincus, a global private equity investor, agreed to acquire a 25 percent equity stake in Metavante, which will become an independent entity. (For more on the news, see the BS&T Blog). Metavante says the split will not affect the partnership with Temenos; rather, it will serve to enhance it.
Overall, suggests Jeanne Capachin, research VP for the global banking and insurance practices at Financial Insights (Framingham, Mass.), the core banking deal makes sense for both companies. "It fills a hole in Metavante's offering by giving them a core banking application to sell to large banks," she says. "For Temenos, this helps them break into the American market, which is very difficult for a foreign vendor."