In the wake of the March acquisition of SunTrust Data Systems Co. by Bisys Group Inc., five of SunTrust's community bank clients have switched their service contracts to rival Fiserv Inc.
The subsidiary of SunTrust Banks Inc., which was sold to Little Falls, N.J.-based Bisys, performs data processing for more than 100 community banks in Alabama, Florida, Georgia, and Tennessee.
Unlike other major outsourcers - which have continued to run multiple data processing systems as they have grown by acquisition - Bisys converts all of its bank clients to its Totalplus proprietary software.
Totalplus includes traditional mainframe services as well as platform automation, cash management, and other applications.
Banks Explore Options
Faced with a system conversions one way or another, officials from some community banks served by SunTrust have decided to explore data processing options other than Bisys, such as in-house processing or alternate service providers.
This has presented Bisys' competitors with an opportunity to boost market share by wooing former SunTrust clients.
While outsourcers have long been happy to poach customers from rivals, for years the major firms have been able to generate strong growth by acquisition, gobbling up smaller service bureaus across the nation.
Last week, for example, Fiserv purchased the data processing subsidiary of AT&T Global Information Solutions, formerly NCR Corp., which, like SunTrust, was exiting the highly competitive data processing business.
Battle for Market Share
And as the industry continues to consolidate, analysts say that the remaining players can be expected to step up their efforts to fight for market share.
So far, five SunTrust banks in Georgia have signed full service processing agreements with Fiserv. These include Coffee County Bank and Citizens StateBank, subsidiaries of the $112 million-asset Southland Bank Corp. in Douglas; Farmers State Bank and Security State Bank, subsidiaries of Farmers Baneshares, a Dublin-based bank holding company with approximately $80 million in assets; and Broxton State Bank in Broxton, with $19 million in assets.
Fiserv officials say they have been able to attract the banks because the firm is using a processing system, well known in community banking circles, developed by Information Technology Inc., Lincoln, Neb.
Service Bureau Approach
Brookfield, Wis.-based Fiserv is offering the system on a service bureau basis, an advantage to the community banks, since many can't afford to purchase the system themselves. Fiserv licenses the software from Information Technology and runs the system for the banks.
Community banks can also buy the software and pay Fiserv to operate it for them. With this option, banks that eventually want to move the system inhouse have the advantage of already owning the license.
In either case, banks later choosing to process in-house won't have to go through another, often messy, data conversion.
This was the main reason cited by former SunTrust bank officials who have decided to process with Fiserv.
Banking on Conversion
The first to sign with Fiserv was Coffee County Bank, after 20 years with SunTrust.
Ken Lanier, chairman and chief executive, said officials were looking for an in-house processing solution because SunTrust's system had not been updated and was no longer meeting the bank's needs.
Bank officials were thinking of purchasing Information Technology's software, Mr. Lanier said, until they learned that Fiserv was offering it on a service bureau basis.
Mr. Lanier said that Fiserv offered them "a good deal with a lot of options," and that they "didn't feel trapped" by the data processing contract.
After three years, the bank can buy the software and bring it inhouse if they choose to.
A Matter of Choice
The decision to process with Fiserv came down to "a choice of conversions" for Farmers State Bank as well, said Edward E. Morris, president.
According to Mr. Morris, bank officials had been contemplating bringing processing inhouse because they thought it might become cost effective as the institution grew.
"If we had converted to the Bisys system, and later decided to bring processing in-house, we would have had to go through another conversion - something the bank wants to avoid," Mr. Morris said. Farmers has the same option to run the system themselves after three years.
Conversions of the SunTrust banks to Information Technology's system are scheduled to begin in late fall, said Fiserv officials.
The company will offer core account processing, a range of item processing, and automated teller machine service.
Georgia on Their Minds
Fiserv has opened a new data center in Macon to accommodate the new clients and existing customers currently serviced through its Atlanta facility.
William L. Kenney, president of Fiserv Atlanta, described the SunTrust situation as a "windfall" that has created a "host of opportunities for companies like us to market to these clients."
Fiserv is actively pursuing the SunTrust banks by holding seminars throughout Georgia and inviting the bankers to data centers to see how the system operates.
According to Mr. Kenney, the banks, for the most part, are taking a wait-and-see position.
But he predicts that a significant number of them, perhaps 30%, will shift from Bisys to other data processors during the next year.
'Certain Amount of Fallout'
Lynn Mangum, chairman and chief executive of Bisys, said company officials are "confident that the majority of the banks will stay with Bisys."
"There's always a certain amount of fallout" experienced after acquisitions of this kind, he said.
Since SunTrust's data processing system was "running out of gas," Mr. Mangum said, some SunTrust banks "may have already started the process of looking elsewhere" for data service providers.
Remaining SunTrust banks will be converted to Totalplus over a three-year period, said Mr. Mangum.
Besides Fiserv, other data processing service providers are vying for SunTrust bank business, including Broadway & Seymour Inc., based in Charlotte, N.C.
Although no strategy to approach SunTrust banks has been developed at a corporate level, the SunTrust banks "definitely represent the kind of client base we'd like to pursue," said William W. Neal 3d, chairman and chief executive of the company.
A Niche Player
Broadway & Seymour serves 500 clients in more than 40 states, providing core and ancillary processing service to community banks with assets below $1 billion.
Although the bulk of Broadway & Seymour's business is providing systems integration and planning and support of its proprietary systems to big banks, Mr. Neal said that small banks are a very important part of its business.
Likewise, the SunTrust banks represent an important opportunity to a new data processing startup called Provesa Inc.
Formed in April, the Norcross, Ga.-based company recently acquired Data Bank Solutions from Florida Informanagement Services Inc., giving it a client base of 40 community banks.
Targeting SunTrust Banks
A major thrust of the new organization will be to target SunTrust banks, said Donny Jackson, president and chief executive.
Mr. Jackson said that Provesa can offer the banks a "local option" and "personal service" they may not get from larger data service providers.
He added that officials of Provesa, veterans of the banking industry, already have relationships with many of the SunTrust bankers, which will be an advantage in their attempts to drum up new business.
"We'll manage to get our share of banks deciding not to stay with Bisys," Mr. Jackson said.