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10:40 AM
Jerry Silva
Jerry Silva

The 2014 FinTech Rankings: A Sneak Preview

For over a decade, IDC Financial Insights has collected information about the world's top technology vendors that provide hardware, software, and services to banking, insurance, and capital markets firms globally.

With 65% of the total IT budgets at financial institutions going to third-party providers, the analysis in the annual FinTech Rankings has become an important measure of the health and direction of technology in the industry and the emergence of innovative solutions from new players, as well as playing a critical role as a tool for financial institutions during budgeting and vendor selection efforts. 

The 2014 FinTech Rankings will be released next week, but a preliminary analysis of the data points to some interesting trends that indicate what's happening in the industry today. For example, more than two thirds of the top 100 IT providers on the FinTech Rankings experienced stable or growing revenues over the previous year. Almost a third of the companies experienced revenue growth in excess of 10% year-over-year, with some companies reporting up to 30% revenue growth last year. With overall financial services IT spending growing at about 7% from 2012 to 2013, this is a clear indication that IT spending is healthy and continues to consolidate in the top vendors globally, a trend we've seen since the first rankings in 2003.

In banking, two areas of technology are leading the growth curve: consulting and system integration firms that drive more than a third of their revenue from financial services, and integrated bank systems providers that provide core banking systems as well as peripheral solutions. Of the 20 fastest growing companies represented in the top 100 in the FinTech Rankings, 12 were either consulting and system integration companies or integrated bank systems firms, and those 12 companies represented 25% of all 2013 IT revenues the FinTech Rankings Top 100. 

This underscores a phenomenon we've been seeing for some time: More and more of the IT spend in financial services is going to the one-stop-shopping providers that can support technology transformation with a complete offering of software and services. IDC believes that financial institutions will continue to consolidate their IT spend on these kinds of companies as the third-platform technologies, particularly big data and cloud, tax the internal resources necessary to implement the solutions needed to transform the business. 

As institutions continue to benefit by the increased levels of integration and service by the larger companies, IDC Financial Insights believes that the days of mono-line IT solution vendors are dwindling for all but the smaller, innovation-led firms. For this reason, we expect to see more M&A activity in financial services IT as major vendors acquire technologies to complete their offering portfolios and as institutions continue to simplify their vendor ecosystems.

The top 20 companies listed in the Enterprise 25 category of the FinTech Rankings (companies whose revenue from financial services was less than one third of total revenues) saw an aggregate revenue growth of just under 3.5%, a more modest growth rate than the specialty and financial services-focused companies in the FinTech Rankings Top 100. (Changes to the selection criteria for the Enterprise category would skew the aggregate growth for the other five vendors on the list.) However, this aggregate rate belies the variability in revenue growth in major technology firms like Hewlett Packard, Accenture, Cisco, Oracle, and others. Future reports will look at the details around the success of these large technology providers in the context of financial services spending.

Finally, new entrants to the FinTech Rankings Top 100 list came from all sides of the financial services technology landscape. A number of digital banking and payments companies are making their first appearance on the FinTech Rankings -- a clear indication of the importance of the "bank anywhere" trend that is drawing investments from banks globally. Based on this year's rankings, it is clear that payments is another part of the industry where growth is poised to explode over the next few years.

Over the next few weeks, IDC Financial Insights, in partnership with Bank Systems & Technology, will publish a series of reports providing detailed insight into the 2014 FinTech Rankings and how this information can inform strategic spending in financial services institutions globally.

For more information, please visit IDC Financial Insights 2014 FinTech Rankings.

Jerry Silva is research director for IDC Financial Insights, responsible for the global retail banking practice. His research focuses on technology trends and customer expectations and behaviors in retail banking worldwide. He draws upon over 25 years' experience in the ... View Full Bio

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Join Bank Systems & Technology Associate Editor Bryan Yurcan, and guests Karen Massey and Jerry Silva from IDC Financial Insights, for a conversation about the firm's 11th annual FinTech rankings.