Continuing a trend, 40% of the U.S. banks and thrifts that bought core processing systems last year hired outside companies to run them, a survey said.

Three hundred forty banks and thrifts signed outsourcing contracts for the newly bought systems, according to Computer Based Solutions Inc., which compiled the statistics.

And overall, 39% of all banks and thrifts were outsourcing their processing last year, the Dallas-based company said.

"Things move nicely, incrementally, but not exponentially" in the outsourcing market, said M. Arthur Gillis, the president of Computer Based Solutions.

The major systems providers continue to expand the outsourcing portion of their businesses. Last year they bulked up by pursuing new markets such as Internet banking and start-up institutions.

Fiserv Inc. topped the charts for new outsourcing sales in 1998, with 125 new contracts for core bank application processing. Alltel Information Services and M&I Data Services Inc. both had 15 new contracts in 1998, according to Mr. Gillis' own estimates.

The other big outsourcing company, Electronic Data Systems Inc.'s financial industry group, did not respond to Computer Based Solutions' annual outsourcing survey this year. Mr. Gillis said the company's numbers would not affect the survey's total of outsourcing agreements, since EDS is focusing on very large banks, which do not typically outsource core data processing. EDS officials did not reveal how many bank core processing agreements the division had signed.

Providing processing for Internet banking ventures is proving to be fertile ground for the outsourcers.

M&I Data has about 200 customers using its services to support Internet- and PC-based banking, said Daniel R. Shannon, vice president and chief marketing officer for the Milwaukee-based subsidiary of Marshall & Ilsley Corp.

Columbus, Ga.-based Synovus Financial Corp., for example, last year picked M&I to run core processing for its 36 subsidiary banks and their on- line operations, as well as Synovus' separately chartered

Alltel has generated business by offering integrated support for all delivery channels, particularly call centers and the Internet, said John R. Amatangelo, senior vice president and managing director of bank operations at the Little Rock-based company.

Harris Bank of Chicago, for example, recently extended a contract it had with Alltel since 1995 to include support for its call center and Internet operation.

Michael Littell, president of EDS' U.S. banking division, said he also sees "the Internet as big." The company aims to be the outsourcer of choice for Internet banks.

Among large banks, outsourcers are picking up business in bits and pieces. Leslie Muma, the chief executive officer of Fiserv, said that over the last two to three years an increasing number of large banks have become more likely to outsource certain aspects of their businesses such as check processing.

EDS also has signed a number of contracts for selective outsourcing, such as for desktop publishing, Mr. Littell said. For First Union Corp. of Charlotte, N.C., for example, EDS is maintaining software and developing some core processing systems.

Since November, Bisys Group Inc. of Little Falls, N.J., which earns most of its revenue through mutual fund and insurance processing, has signed multiyear outsourcing agreements with 18 start-up banks, said Stephen K. Ryan, executive vice president for bank information solutions.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.