WASHINGTON — The big question that banks have long asked themselves before embarking on a new tech initiative has changed, a subtle adjustment that has serious ramifications for how tech firms and financial institutions will engage with each other in the future.
"The question of 'do we buy or do we build?' is an old-fashioned question," said Vipin Gupta, the chief information officer for Key Community Bank at KeyCorp (KEY), a division that includes retail, business, commercial middle market and wealth management/private banking.
Speaking at an event during the BAI Retail Delivery Conference that
Gupta said that at Key Community Bank, this broad approach to outsourcing has allowed the bank to upgrade its CRM, wealth management and payments platforms at the same time. "We can do all of that simultaneously because we can afford it," he said in reference to the benefit of outsourcing.
Gupta said successful suppliers in this new environment can reach several departments of the bank, such as business lines, IT and risk. "Unidivisional decisions on technology purchases are gone…[Tech firms] must be multi-lingual, not just able to speak to technology or business…The buyer is more savvy, and there are more people who used to work on the sell side that are now working for banks," said Gupta, adding that he has worked as a consultant during his career.
With more tech services being delivered by external partners, ensuing availability and security take on a greater role. Gupta said Key Community Bank has started incorporating risk into its contracts with tech suppliers, a trend he said the institution was getting better at over time.
Sunnier Outlook
At the event, Marc DeCastro, research director of consumer banking for IDC Financial Insights, said the economic picture surrounding the tech firms in the FinTech 100 has improved. He said revenue for the firms in 2011 was $64 billion, up from $53 billion in 2010 and 2009, $48 billion in 2008 and $50 billion in 2007. DeCastro also said 13 FinTech ranked firms reported declines in revenue in 2011, down from 30 in 2010. "It's great to see these numbers going in the right direction," he said.
The FinTech 100 includes firms that earn at least 33 percent of their revenue from financial services. A separate FinTech's ranking includes that largest 25 enterprise IT firms-or firms that earn less than 33 percent of their revenue from financial services, yet still produce a substantial earnings in the financial services sector. IBM was the top ranked company in this ranking Together these 125 firms make up about 75% of global bank IT spending, which IDC Financial Insights said was $380 billion in 2011. The top ranked firms this year are FIS (FIS), Tata Consulting Services (TCS), Fiserv (FISV), SunGard and NCR (NCR). FIS was also the top ranked firm in last year's ranking. While most of the firms are headquartered in North America (62%), DeCastro said globalization will lead to more geographic diversity in the future-21% of this year's ranked firms are headquarted in Europe, 15% are headquarted in the Asia Pacific region and 2% are based in Latin America.
DeCastro said the major issues that banks will be considering in the next year will be the growth of big data, cloud computing, mobile banking and social media-all topics that came up extensively in BAI sessions in the conference's first day. He said new IDC Financial Insights research on cloud computing and outsourcing found that traditional in-house tech deployments will decreased from 44 percent to 36 percent over the next two years, a trend that supports Gupta's assessment of the outsourcing-heavy sales landscape.
