The International Core Vendor Blues

Three months into 2018, and the year is already shaping up to be the “year that could’ve been” for international core vendors in the U.S. regional banking market (i.e., roughly $10 billion to $50 billion asset range).

Some big wins for the Blue Logo Gang (Infosys, Temenos, SAP, Tata Consultancy Services) have been announced and implementations are again in process—e.g., Temenos at Commerce, TCS at Zions—after some high-profile busts over the past decade. But it’s hard to put a happy spin on what’s really going on out there.

Regional banks are looking to the foreign players for things domestic vendors aren’t delivering on—speed-to-market, lower costs, modern architecture and new capabilities. A lot of bankers wouldn’t even consider converting if their existing providers provided a few of these things.

International core vendors have a tremendous opportunity but are blowing it with their inability to communicate basic information to the market. Across the board, the Blue Logo Gang presents its “demo-by-PowerPoint” laden with common service-oriented architecture visuals and buzzwords like “product engine,” “stack,” “expose everything as a service,” and my personal favorite, “omni-channel hub.” But no actual demo.

Can We Get a Few Questions Answered?

Getting answers to a few basic questions would make life easier for everyone involved. Regional banks want more clarity regarding the Blue Logo Gang’s:

• Core offering. By “core” I mean deposit and loan account processing along with customer information (CIF). Bankers that want to talk about core don’t care about collections-only or digital-only deployments, for example. They want to know exactly how far along in U.S. federal and state compliance the Gang’s solutions are and what they’re going to be expected to test (and pay for if it’s not developed yet).
• Target market. Vendors that will never go after an institution that needs a fully integrated suite should just go ahead and say so publicly and save bankers the time. Can anybody figure out whether SAP is currently trying to sell core to anybody in the U.S. market? If you know the answer, let me know. If the economics of the solution just aren’t going to work for an institution under $20 billion in assets, then that should be made clear, too.
• (Real) client base. Bankers want to know if the core solution (remember the definition above) is deployed fully or in parts in a U.S. financial institution and what products are live. Blue Logo Gang salespeople are notorious for omitting details about exactly what phase of implementation a given client is in (production, pilot, development). Deployments in direct banks can be relevant, but bankers sure would rather talk about a bank with branches and commercial business.

Given the lack of basic information, not to mention actual live U.S. deployments to date, there aren’t too many institutions with the fortitude to commit to a core conversion with an international core vendor, but those that do want to have a really good idea of what makes taking the perceived risk worth it. Why is “real time” good financially? Why is modern architecture? Inquiring minds want to know.

2018 Priorities for Bank Technology Executives

Who Should Be Looking at the Blue Logo Gang?

Direct banks make up some of the early deployments and are natural candidates along with banks with a need for multicurrency capabilities. There are also examples of foreign banks with live U.S. subsidiaries. That’s just a small sample of the thousands of banks in the U.S., however. In addition to having a desire for thrill-seeking and the patience to endure at least 12 months for a core conversion, other characteristics of banks that are good candidates for the international vendors include:

• Banks with mature I.T. organizations that have already demonstrated success with middleware integration;
• Banks comfortable with managing “toolkit” solutions, developing with software development kits (SDKs), and executing rigorous testing processes (as opposed to solutions that only require maintenance of a much more limited set of parameters); and
• Banks comfortable with managing a best-of-breed application/vendor portfolio and have access to the talent or partners to support this kind of environment. (Ask the Blue Logo Gang about its teller/branch capability to understand why you’ll need this.)

Architecture is indeed an attractive aspect of these solutions, but don’t let the “architecture astronauts” drive the selection process. Attention to good old-fashioned requirements and business unit engagement are also important when investigating core alternatives.

A vibrant, competitive, U.S. core banking environment is beneficial for banks. The Blue Logo Gang has an opportunity to make that environment a reality. Getting specific and real with regional banks would be a great first step in that direction. And maybe next time I sit down to write about international core vendors I won’t come away so blue.