FIS Modern Banking Platform
Advance your bank with a modern core platform.
Joel Wheelis | group executive, North America Banking Solutions, FIS
September 19, 2019
According to the Financial Brand, a reported 80 percent of bank operations leaders say their organization's existence could be threatened if they don't update technology to be more flexible and capable of supporting rapid innovation. As your financial institution modernizes and transforms core banking technology, you need to ensure your partner brings the best of both worlds to the table. This means banks should leverage a partnership embracing the best attributes of a traditional core banking provider as well as those of a new entrant fintech.
Gartner defines a core banking system (CBS) as a back-end system that processes daily banking transactions and posts updates to accounts and other financial records. CBSs typically include deposit, loan and credit processing capabilities, with interfaces to general ledger systems and reporting tools.
A partner with a proven track record delivering these core banking services to financial institutions over time should provide a high degree of stability. They can weather economic downturns while continuing to invest in research and development. At the same time, the traditional partner should have accumulated substantial intellectual property and years of experience that add significant value to the overall relationship.
How many times have you read about an emerging technology firm in the American Banker one year, only to never hear about it again the next? Smaller firms can’t afford any missteps. Larger partners may generally move more cautiously, but their staying power ensures they do not disappear due to a single misguided investment.
Long-time partners will develop deep relationships with the bankers they serve, understanding that both the bank and technology provider will be together for potentially a number of years. A long-term partner understands the importance financial institutions place on market creditability and stability.
Aite defines a core banking provider’s stability as the overall strength of the vendor in terms of financial stability, management reputation, risk management and global presence. This component determines whether a given vendor has the foundation to compete and sustain its overall market presence. Besides stability, an established partner understands banking regulations and the compliance challenges their financial services partners must address. The staff of these partners provide experience enabling technology solutions work in a regulated industry.
Counter-balancing the benefits of the traditional core banking partners are the advantages new fintech entrants bring to financial organizations. These firms generally have built new technology from the ground up, unencumbered by restraints of legacy systems. Banks should seek partners that can offer this type of new vibrant technology. And they should expect to deal with a staff that has no preconceived notions on how to best approach system development.
New fintechs develop solutions that are often based on an Agile development methodology, working in scrum teams to accelerate the release of new code and functionality. This mindset opens the teams for early and frequent customer input. It also ignores preconceived notions and “not-invented-here” attitudes. A bank should seek a partner that offers new solutions, developed from the ground up with agility and open-mindedness. The best of both worlds combines these partner attributes with stability and financial staying power.
Best of Both Worlds
Traditional Partner Non-traditional Partner
To further take advantage of the solutions fintechs can offer them, banks should evaluate their partners in how invested they are in both Research and Development (R&D) and developing new ventures. R&D expenditures should grow year over year, and the core provider should cultivate startup ventures that can rapidly integrate new financial solutions into core banking offerings. At FIS, we invest 6-7 percent of revenue annually back into development to fuel future growth.
One example of this unique investing is the FIS FinTech Accelerator in Little Rock, Arkansas. Now in its fourth year, the FIS FinTech Accelerator program is designed to accelerate the development and growth of early-stage financial technology ventures. Ten startups are selected to participate in a rigorous, 12-week program based in Little Rock, Arkansas. In addition to a monetary investment, each participating startup will receive in-depth mentoring and training from FIS and The Venture Center as well as an opportunity to receive feedback on their ideas from leading banks and financial institutions, along with potential clients and investors.
A forward-thinking core provider will introduce refreshing, relevant and realistic new partners to financial institutions at an on-going basis. Their due diligence and investment will further extend a bank’s research and development efforts.
Financial institutions need to look at core banking partners through a different lens. Innovation and rapid market change dictate expanded expectations. Providers that combine traditional strengths with agility, creativity, innovation and an organization that enhances non-traditional aspects of our strategy will best serve financial institutions as long-term partners.
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