Regardless of which measure you choose, core apps (deposits, loans, financials and customer database) represent more than any other piece of the tech pie, which consists of 132 slices in all. Core represents more cost, more usage, more transactions processed, more hardware, more workstation inquiries invoked, more mobile phones engaged, more departments of the bank served, more customers, more chances for error, more regulatory feeds, more bank (or vendor) IT people to support core, more bank bookkeeping department people to reconcile last night's processing, more backup facilities to cover alternative ways of doing what should have been done if it didn't get done, more hackers breaking into the customer module to steal sensitive data, and more unhappy inquisitive bank execs who want to know something that programmers of the core never dreamed would be asked.But ironically, the pieces of the tech pie that rank far lower in terms of "how many" are the ones that best mitigate risk, and thus protect bank earnings. You've heard of risk, of course. Some 16,400 financial institutions in the U.S. are now familiar with risk, and they didn't have to attend a seminar to find out. So look at it this way. Core is the workhorse. You can't run a bank without it. Everything else falls into what I call the Department of Intelligence.
In 1984, when a bank installed a new core system, it thought the job was over. I picked 1984 because it turned out to be a year that no core vendor ever saw repeated-1,200 FIs bought core that year. Then the PC entered, and thanks to a bunch of entrepreneurs who had more brains than money, we started to see the early signs of intellectual systems. For $5,200 and a dime to screw down the connectors, anyone, including myself, could buy a PC, load it with WordPerfect, dBase and VisiCalc to produce an analytical giant for a community bank that was as good as the Rand Corp. (relatively speaking). To prove my point, in 1985 Dow Jones-Irwin published a book, "Microcomputers in Financial Institutions." In it, I described 21 companies that created software for the thinking banker. Today, only five of the 21 survived. Two of them (IPS and Sendero) are Fiserv companies. One (Systematics) is a Fidelity National Information Services company and two (Olson Research and Plansmith) maintained their independence. That's enough for your history lesson.
Today, my book "Automation in Banking" identifies all the good pieces of a bank tech system. You know core is one of them. Here are the rest:
ALM/Profitability Solutions Platform Automation Solutions Check Imaging and Processing Solutions Internet-based Solutions EFT and Credit Card Solutions Document Imaging Solutions Voice Response Systems Mortgage-Related Solutions Insurance and Securities Industry Solutions Customer Relationship Management Solutions Treasury Services and Cash Management Solutions Data Warehouse Solutions Compliance Solutions Fraud Prevention Solutions Electronic Bill Presentment & Payments Solutions Trust Accounting Solutions Risk Management Solutions Business Intelligence Solutions Remote Deposit Solutions Mobile Banking Solutions Disaster Recovery and Business Continuity Solutions Data Security Solutions
If you're a $100 million bank and you've got all of the above, you chose a good primary vendor and you're sitting pretty. If you don't have all of the above, stop biting your nails and go shopping. There's gonna be a 14th recession down the pike if you're 40-something years old today. The Boy Scouts weren't kidding-Be Prepared.