The top three producers of banking compliance software promise that 1996 will be the year the industry's leaders are separated from the wannabes.
The top software providers - Bankers Systems Inc., CFI ProServices, and Formation Technologies Inc. - all underwent basic managerial, structural, or philosophical changes in the last year. And all three believe that the benefits of those changes will show in the new year.
Robin Smith, president and chief executive at Denver-based Formation, said the big three companies must produce in 1996 - or risk falling behind their rivals in the race for industry superiority, especially in servicing the Internet.
"It's a key year for the financial-services industry and those who provide it with products," said Mr. Smith. "It will be a bellwether year that will be telling in who becomes the top long-term players and providers in the industry."
While 1996 may be a year of competing for the future, the common theme of 1995 was reassessing priorities. Bankers Systems started the year with a bang, and CFI and Formation soon followed.
In January, Bankers Systems of St. Cloud, Minn., announced that it had been purchased by BancBoston Capital and the investment firm of Goldner, Hawn, Johnson & Morrison. The investors provided more money for the company and emphasized the need for more research, most of it directed toward the firm's long-in-development Rembrandt loan-origination system.
For Formation, 1995 was the second straight year of major changes. In early 1994, the company was purchased by John H. Harland Co., an Atlanta- based check-printing firm. In mid-1995, Formation hired Mr. Smith away from Fiserv Inc., an Orlando-based data-processing firm.
Mr. Smith said the company made a strategic shift away from "being all things to all people." A new focus on research and development and an emphasis on helping large banks allowed the firm turn 1995 into a profitable year, he said.
As for CFI, early in the year the Portland, Ore., company's philosophy was recast as well. CFI officials decided to expand their focus to include home PC banking and telephone banking.
"Our goal is to be able to provide service for our customers at any chosen point of contact," said CFI chairman and chief executive Matthew Chapman. "Whether it was electronic banking, phone banking, or traditional branching, we wanted to bring it all together."
Several new acquisitions and partnerships occurred as a result, including the purchase in May of Texas Southwest Technology Group, Houston, now called CFI-Texas. But along with those transactions came big expenses, according to CFI president Robert P. Chamness. Still, the company turned a profit.
The three companies declined to disclose their revenues.
The public will start seeing results in 1996 as all three firms plan major product releases and marketing blitzes.
Bankers Systems officials expect to complete testing on Rembrandt in April, and have the system on the market by late summer. The Windows 95- compatible product will allow banks to link parts of the loan-origination process, like pricing and credit evaluation, in one system.
It has been in development for about two years, and company vice president Hal Andrews believes the product will be worth the wait.
"We've been getting phenomenal response," Mr. Andrews said. "We believe that this will revolutionize loan origination in the industry."
Formation's Mr. Smith and CFI's Mr. Chapman and Mr. Chamness have set their firms' sights on the Internet and other new technologies.
Mr. Chapman said 1996 will be "the year of the alternative delivery systems." He added that CFI has spent four years, and "many, many millions of dollars" researching and developing products for these systems, such as Personal Branch home banking software and Genesis for telephone banking.
Industry officials said the firms that establish themselves as a presence in electronic banking first will have a great advantage over the competition.
But the Internet is far from the only area that has yet to be embraced by the compliance software firms, Mr. Smith said. Though no firm timetable has been set for their release, he said Formation is developing products to handle banks' asset-recovery systems, and some issues facing nonbank lenders.
The asset-recovery software would let banks follow steps to fulfill the legal requirements when tracking down someone with an overdue loan. It also could help banks walk the borrower through bankruptcy filings.
Mr. Smith also said they are working on forms to help nonbanks that make loans - like car dealerships - easily make accurate disclosures to their customers.
"No matter where the loan is created, we want to apply something to that end," he declared.
