Editor's note: Bank Systems & Technology is partnering with IDC Financial Insights to announce the results of the firm's annual FinTech Rankings. A series of articles with analyses of the findings will appear in the coming weeks.
IDC Financial Insights is very excited to announce the 2014 FinTech Rankings -- the 11th year the analysts have researched the financial technology market to compile this "Who's Who" among IT vendors to the global financial services technology industry. The FinTech Rankings recognize the providers that supply the technological backbone of the industry. And this industry continues to grow.
IDC Financial Insights forecasts worldwide spending on IT across the globe to reach half a trillion dollars by 2018. To put that in perspective, $500 billion is equivalent to the economy of Norway, the 25th largest in the world. In last week's FinTech Rankings article by Jerry Silva, research director for Global Banking at IDC Financial Insights, he stated that more than 65% of total IT budgets is directed to third-party providers. That puts total third-party external spend on financial services technology at more than $300 billion annually.
[Join the Women in Technology Panel & Luncheon at Interop on Wednesday, October 1. How different are IT career paths and opportunities for men and women in 2014? Join your peers for an open forum discussing how to advance in an IT organization, keep your skills sharp, and build a mentoring network.]
Jacksonville, Fla.-based FIS tops the FinTech Rankings Top 100 for the fourth year in a row, followed by Tata Consultancy Service and Fiserv in the top three, with Cognizant, NCR, Infosys, Diebold, SunGard, Nomura Research Institute, and Wincor Nixdorf rounding out the top 10. Together these 10 companies earn more than $35 billion, more than 11% of the total FinTech Rankings pie.
The leaders on the Top 25 Enterprise list include IBM, Hewlett-Packard, Dell, Microsoft, and Accenture in the top five positions. These five companies earned more than $58 billion collectively from financial institutions, almost 20 percent of the total FinTech Rankings spend.
We have clearly seen consolidation in the vendor community in the 11 years of the FinTech Rankings, with the larger providers getting even larger as they acquire assets to broaden offerings and provide more holistic offerings to their institution clients. And while there has been talk for years of vendors being trusted partners to their clients, we are seeing evidence of that coming to fruition more recently. Consolidation is happening in the IT organization, and CIOs want fewer relationships with vendors, but relationships that are much more strategic.
We asked Gary Norcross, president and chief operating officer of FIS, why FIS has successfully maintained the top spot on the FinTech Rankings, and he told us, "We have a passion about making sure that our client banks are successful. And we believe that banks recognize that and have allowed us to grow with them." He says banks see the pace of technological change increasing, while they are experiencing challenges in revenue from fees, tightening margins, and the burden of regulatory compliance -- all of which drives the industry toward companies like FIS that can provide end-to-end products and services. Norcross is also quick to credit the 40,000 employees of FIS with the company's continued success.
The pace of consolidation has certainly slowed, but 2013 saw a very significant acquisition by D+H of Harland Financial Solutions. We also had several new entrants to the FinTech Rankings this year. We welcome the following companies: iGate Corporation at 29, Global Payments 48, Enventnet 49, Eze Software 51, Keylane 90, Target Group 92, Crealogix 96, and on the Enterprise Top 25, VMware, Sapient, and Tech Mahindra.
Looking ahead, there are challenges the industry has persistently faced for more than a decade -- compliance and security, cost containment, revenue sources, channel strategies, payment supply chain, customer management -- and more recent opportunities in new technologies like cloud, big data and analytics, mobile/digital, and social. It is clear that the technology providers on the FinTech Rankings are eager to align with their institutions' partners and continue to find innovative solutions.
Norcross sums it up nicely: "It's an exciting time to be in the industry, it's an exciting time for technology change, and we're as excited as we've ever been to participate in the success of the industry."
FinTech rankings methodology
IDC Financial Insights sent requests for basic financial information to several thousand technology companies globally that are vendors to the financial services industry. IDC Financial Insights also leveraged publicly available resources such as Hoovers, Edgar, company filings, and company websites to validate data provided and to capture additional information. It also used proprietary research databases, internal research currently underway, previously published reports, and the resources of its parent company, IDC.
For all of the companies, IDC Financial Insights determined eligible calendar year 2013 revenue, which consists of revenue generated from sales of qualifying products and services to the financial services industry. To be included, revenues must originate from either financial institutions or software, hardware, and IT services
Not included are revenues from any network, telecommunications, electronic exchanges, or data services (e.g., market/credit) providers. For those vendors that provide qualifying services and solutions in addition to nonqualifying ones, we included just the qualifying portion of their revenue as the basis for our rankings.
Two major categories of companies are included in the rankings:
- Top 100. Financial technology companies that derive more than one-third of their total global revenues from the financial services industry
- Top 25 Enterprise. Enterprise companies in financial services that are horizontal technology firms selling products and services across multiple industries and derive less than one-third of their revenues from financial institutions
Firms, such as market data providers or credit bureaus, that derive significant revenues from excluded categories, but also have revenues tied to software, hardware, or services, are considered for these rankings. For these data providers, the revenue attributed to data is used to qualify the provider to meet the one-third hurdle, yet only the qualifying portion of their revenue is included in the ranking. This is why vendors appear on the FinTech Rankings Top 100 list with revenues below 33 percent.
IDC Financial Insights made a concerted effort to include all possible candidates for the rankings. Some companies in qualifying industries that submitted forms did not make the rankings because of insufficient revenue or inability to validate submitted data. For companies outside the US, we calculated US dollar figures using IDC’s standard exchange rate for the year-end 2012.
Karen Massey is a senior research analyst with IDC Financial Insights' Consumer Banking practice, specializing in core banking and retail delivery channels. She has more than 20 years of experience in the financial services industry, with 15 years of experience advising ... View Full Bio