There's More to Core Switches Than Meets the Eye

Fewer banks are making core systems switches today, compared to 10 years ago.

The number of FIs that have switched to different (hopefully better) core systems in the past 10 years has been moving downward each year. From 8 percent 10 years ago to 2 percent in 2010.

There are a few interesting details in this picture:

There was a slight upward move in 2010 of .3 percent.

84 percent of the FIs were small, less than $500 million in assets. That fits because the total landscape of small FIs is 89 percent.

Commercial banks are still the largest group of switchers at 73 percent.

Fiserv is still the KOK (King Of Kore) at 45 percent of all new core sales in the U.S.

Fewer switches is no surprise to this analyst for two reasons: 1) There's strong stickiness to core. If a bank chose correctly, it likes the system even more because employees get to know the finer points by using them. 2) During the past three to four years, bankers have avoided any idea of spending money on anything that was "good enough." Do I have to explain that?

There's a bit of poetic justice in these numbers because for at least 20 of its 28-year life, Fiserv has put up with a lot of critics, including well-meaning cost accountants and Wall Street analysts, about redundant support and maintenance work to keep 19 brands of core alive. It was a classic case of critics knowing how to crunch numbers while knowing nothing about the business side of bank technology.

Here's what I mean about the business side of banking. Sunsetting a system (a euphemism for "We're putting you through a forced conversion in order to improve our bottom line.") is like telling a banker he has to replace half the employees in the bank in the next 18 months. It doesn't work.