American Banker  |  Thursday, November 8, 2007

By Jeanne CapachinýDavid Longobardi

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American Banker and Financial Insights are proud to present the fourth annual FinTech 100 special report.

The report emerges at a time when the environment for technology spending by financial institutions is not nearly as bleak as the overall gloomy conditions that have battered bankers in the latter part of the year.

Time will tell, of course, but as this goes to press, there is more equilibrium between growth and savings than at any other time in the last 10 years.

Controlling costs remains an important theme, and initiatives in the areas of data security and regulatory compliance are still nonoptional. But institutions are pursuing strategic projects that focus on customer needs and front-office applications. Against this backdrop, technology providers are jockeying for position and looking for growth opportunities.

The industry's continuing focus on service-oriented architectures is a case in point.

For outsourcers, SOA can be a boon as banking companies become more comfortable with cleaving off inefficient processes and routing them to low-cost geographies or specialist firms. For application providers, SOA raises other pressing questions: How can we price offerings in a componentized world? What can we expect in the way of industrywide standards? How can we manage and protect intellectual property?

One thing is clear, however: SOA — along with other broad-based initiatives such as enterprise infrastructure renewal, data management, and messaging — is influencing how institutions consume technology and how they form relationships with providers.

Not surprisingly, projects of this sort have begun to impact our rankings. Companies such as International Business Machines Corp., Infosys Technologies Ltd., Accenture Ltd., Tata Consultancy Services Ltd., and Unisys Corp. are assisting with application development and helping to build the road maps and standards necessary to move from the current state to a more efficient, less complex future state.

SOA's influence is also playing a role in some vendor alliances. Metavante Corp. has turned to Temenos' core banking application as the foundation of a next-generation one. Recognizing that the infrastructure of the future may look very different from what exists today, Metavante is investing in a component-based model that will fit into a more modern banking infrastructure.

This leads to the other big FinTech story for 2007: large banks' discussions with vendors about the future of core banking systems.

Technology has matured, complexity has increased, and some of the foundations have been laid to allow very large institutions to think seriously about core replacement and upgrade. Few are ready to jump yet, as the business case is tough to make and the costs of failure high. But they are ready to listen.

In this context, we expect vendors to benefit from their emphasis on channels and customer centricity, including Fidelity National Information Services Inc. with its Touchpoint application, Oracle Corp. with its SiebelCRM, and Argo Data Resource Corp. with its branch offerings.

Where the Growth Is

Looking at the Top 25 Enterprise Companies in FinTech, we see that these providers — ranked in terms of revenue — also lead in terms of growth. Financial institutions are increasing their IT spending at an average rate of 6.5%, according to Financial Insights research, yet revenue for this year's FinTech 25 grew 14.57% over revenue for companies on last year's list. The FinTech 100 also grew faster than bank spending, at a rate of just over 7%.

For many firms, acquisition was the growth driver. This is especially obvious when you consider the names, all well-respected, that have disappeared from the list over the last few years because of acquisition: Certegy, Carreker, IntraNet, Eontec, Baker Hill, Trema, Barra, and others.

The FinTech leaders now all have broad portfolios of offerings.

What else has changed in the FinTech 100?

After three years of sole ownership of the top spot, Fiserv Inc. now finds itself neck and neck with Fidelity National. Last year's acquisition of Certegy Inc. left Fidelity National with a $500,000 edge in revenue from financial companies — and helped it edge out Fiserv for the No. 1 position.

American Banker spoke with Jeffery Yabuki, Fiserv's president and CEO, about his continuing transformation of the company, including a discussion of plans for its latest acquisition: CheckFree Corp..

That deal closed too late to affect this year's standings but might help Fiserv regain the crown next year. Or maybe Fidelity National will make a move of its own.

Other changes? Broadridge Financial Solutions Inc. made its debut on the list at No. 7 — a pretty high place to make an entrance until you realize Broadridge was spun off from FinTech veteran Automatic Data Processing Inc. last year.

Also, Tata cracked the top 10 for the first time, making it the only Indian-headquartered firm in that cohort. Like many offshore outsourcers, Tata had tremendous growth last year as more financial institutions took the "global sourcing" plunge.

Acquisitions helped a few companies jump up the list — Wall Street Systems (with its Trema acquisition), and Transaction Systems Architects Inc.'s ACI Worldwide (P&H).

Infosys is another Indian firm that has shown fast growth. It started in our 2004 rankings at No. 25, with about $383 million of financial services revenue. Since then it has more than doubled in size, chalking up $725 million of financial services revenue and a No. 18 spot.

Speaking of high-fliers, Open Solutions Inc. leaped 18 rungs on the ladder in the past year, to No. 33, by increasing its financial services revenue to $395 million. The provider of core banking systems for community banks and credit unions recently shifted from public to private ownership.

Virtusa Corp., with a year of solid growth under its belt, made its debut this year at No. 80, after just missing the top 100 last year. (Last year it ranked No. 101.)

Some prior years' stars stalled.

Stratus Technologies Inc., once the gold standard for high-availability computing, slipped from No 67 to No. 72. And S1 Corp., the poster child for multichannel systems, fell from No. 48 to No. 56.

And others fell victim to consolidation, of course.

Firms that were ranked last year but were acquired in 2006 include Carreker Corp., RoyalBlue Group PLC, Hyperion Solutions Corp., and Certegy. Others likely will depart next year as a result of acquisitions this year — CheckFree, Corillian Corp., Bisys Group Inc., and Digital Insight Corp.

We hope you enjoy this year's report. And, as always, we welcome your feedback.

Ms. Capachin is research vice president for global banking at Financial Insights, an IDC company. Mr. Longobardi is the editor in chief of American Banker.

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