My bookcase contains 22 past editions of Automation in Banking. The 23rd is still in the oven. The 22 are dog-eared because I have had to refer to them many times to answer questions from very intelligent readers who had a need to know. Last week I read the 1985 Edition, and here are some highlights that got my attention:• The content increased enormously in the current edition, and today's tech companies deserve all the credit. I don't believe there is a technology that even the wisest visionary can dream up that isn't provided by some of the 88 companies in the current edition. I couldn't make that statement in 1985. The best "consultants" in this space are the customers who feed their providers with new and better ways to get the job done. And that feeding process continues today. • The 1985 Edition had some interesting metrics for that era, beginning with the graph on the cover. Initially, most community banks relied on their correspondent banks to service their technology needs. So outsourcing was hugely popular in 1970. Sixty-seven percent of all banks relied on their correspondent bank or a fledgling private service bureau to process their data. In 1985, outsourcing dropped to 51 percent. Today outsourcing is only 44 percent, but before you chip that in granite, you may like to know it's rising again in popularity. • The core vendor lineup was different in 1985. Systematics (now Fidelity National Information Services) was the giant at $180 million in revenue. FFMC was second, NCR was third, Mellon Datacenter was fourth and Citicorp Information Resources was sixth. Oh, and Fiserv was #5 but very impatient. So in subsequent years it acquired #2, #3, #4 and #6 giving it a mass of $620 million if it had all occurred in 1985. M&I Data Services (now Metavante) was at $90 million and Jack Henry was cranking out $13 million. • There were 113 companies offering core systems in either service bureau mode or in-house in 1985. In 2008 there are 13. • Of the top 22 bank tech vendors in 1985, four are identifiable today as going concerns, and all are public companies (FISV, MV, JKHY, CSVI). • Very large computer services companies couldn't seem to grasp the banking business. EDS mismanaged both the in-house and service bureau segments into no-growth businesses. It spun off the in-house piece to the employees, which then was acquired by Jack Henry. It sold the service bureau to a private equity firm that called it Aurum Technology, which then was acquired by Fidelity National. ADP spun off its thrift processing business and named it BISYS which was then acquired by Open Solutions Inc. Large correspondent banks destroyed the business, and eventually got out. One exception was M&I Bank and their exit last year was more elegant. There are still eight banks that offer computer services to banks but those processors are small banks or cooperatives. • In 1985, the average monthly market price to computer process a retail or business customer account was 63 cents (all types of accounts). Today, there is no equivalent average customer account because of new types of accounts such as online banking and EBPP. Even so, the average monthly price is now 83 cents, a 32 percent increase in 23 years. During the same period, the CPI grew 64 percent. All things considered, I believe vendors are doing a darn good job of delivering the benefits of IT, both in cost and performance. • The security of electronic data has taken a huge leap forward. In 1985, there wasn't even a category to display data security vendors. Now there are 16 solutions in the report. If it hadn't been for dual authentication and the initiatives of technology, banks would still be asking for "mother's maiden name." Sorry folks, that's a joke. • In 1985 there were 10 top software companies that supported in-house systems for community banks. Today only five of them exist, two of which would probably never get your attention. Jack Henry acquired (rescued) four of them. Fiserv paid handsomely for two, and Metavante waited a long time but picked the orange just in time. • 1984 and 1985 were considered the years of robust core conversions. By that time, in-house systems had proven themselves as proficient, economical and "dummy" safe. My stats show that approximately 1,000 community banks were converting each year. We'll never see that again.
Bankers, Aren't you glad it's 2008?
Vendors, Have you found the next silver bullets?