Summary
7,000 US banks and credit unions represents a lot of customers for the banking technology companies. While banks may be hurting, their technology needs only increases. With so many recent mergers are there too few providers left? Who has the advantage banks or the providers?
Analysis
Banks continues to find new ways to use information technology. Ever increasing regulatory requirements also drive the demand for technology.
The providers serving this market are Fiserv, Fidelity National Information Services (and Metavante), Jack Henry, Open Solutions, Fundtech, ACIWW, and a couple of other midsized and niche players. Is this the right number so that pricing, profitability, demand, and competition are balanced? Can new players from overseas ever successfully enter this market?
There actually is some good differentiation among these suppliers. I could envision some more consolidation. There is strong demand for new and improved services, so as the banking economy improves I suspect that these companies, who have survived fairly well through this period, will do even better.
Long term, I have a a concern that the larger companies will stop innovating and there is a risk that the foreign software providers, could finally break through into this market. In the long term, the quality of the software vendor's management teams and their ability to deliver on profitability, customer service, and innovation will win.
Howard Bruck consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
