Robert N. Gilmore is not alone in saying that banks will increasingly look to third parties to handle functions they've historically performed themselves.
But CoreStates Financial Corp.'s chief technologist breaks from the pack when he states that banks can still play a major role as a provider of outsourcing services.
In recent years, many large banks have fled the business of providing processing services to other financial institutions.
Philadelphia-based CoreStates, meanwhile, has expanded its processing businesses by venturing into niche areas such as commercial card processing.
Its most significant recent move in this area involved placing three of its processing companies under an umbrella company, known as QuestPoint, which has $160 million in annual revenues.
In part to demonstrate to existing and potential customers the high quality of QuestPoint's services, CoreStates itself uses them.
Mr. Gilmore said QuestPoint's long-term goals include exceeding the expectations placed on the unit by CoreStates' users.
Doing this will enable CoreStates to take advantage of the increasing willingness of even the largest banking companies to farm out operations to third-party service providers.
At a bank stock analysts' meeting last month, Mr. Gilmore said the outsourcing trend was a major influence on CoreStates' technology strategy. "It is the driver of our move into the third-party transaction processing business," he declared.
In some cases, CoreStates has used a strong internal operation as a springboard for a processing business. For example, its leading position in wholesale services led to the creation of businesses in check clearing and commercial card processing.
The bank's strategy in the processing arena also includes determining areas in which it could differentiate itself in an increasingly specialized, niche-oriented banking business.
Mr. Gilmore said individual banks' tendency to back away from some of the investments required to stay competitive in corporate and wholesale banking opened a big window of opportunity for outsourcing providers.
Another line in which CoreStates sees potential is in card-related transactions in the retail area of banking.
The bank was the developer and original owner of the Money Access Service, the regional electronic banking network that operates under the MAC mark.
Three years ago, CoreStates and three other large eastern banks used MAC as the core of a new company, Electronic Payment Services Inc. CoreStates now owns 20% of EPS.
EPS, based in Delaware, is one of the first regional networks to expand beyond the business of switching automated teller machine transactions between banks into more sophisticated and lucrative processing businesses.
MAC continues to be one of the leading ATM and debit point of sale networks in the nation, and EPS' processing subsidiary, known as Buypass, is also doing well, experts said.
However, since Mr. Gilmore is more directly involved with the management of QuestPoint, most of his immediate challenges involve this company.
Mr. Gilmore said QuestPoint's self-imposed challenge is to "deliver $200 million on an annualized basis by the end of this year."
"We like to think we started three companies here in the last two years that have prospects at least as great as what we were able to achieve with MAC and EPS," Mr. Gilmore said.
The companies he referred to are Cashflex, Transys, and Synapquest. Together, these make up QuestPoint.
In 1992, based on the purchase of Financial Telesis, CoreStates formed Cashflex, a full-service retail and wholesale lockbox company. From an initial base of 100 million transactions annually, Cashflex's volumes have grown threefold.
With annual revenues of $75 million, Cashflex is the second largest lockbox processor, behind Mellon Bank Corp. It provides lockbox services for 70 major banks, one-third of them among the top 50 banks in the nation, according to data from PaineWebber Inc., New York.
Transys, launched in October 1993, is a check processor. Its services vary from reading and sorting items to physical delivery, statement rendering, warehousing, and truncation of checks.
Transys processes some five million items daily, both from CoreStates and other banks, primarily correspondent check clearing customers. It maintains relationships with over 200 financial institutions, including J.P. Morgan & Co.
The unit's annual revenues are $75 million, but it's not yet profitable since it is still investing in new processing centers and image-based systems for the proof area.
Synapquest, the credit card processor, was formed in late 1993.
Its services differ from the card-related services of EPS in that Synapquest specializes in commercial credit and procurement card processing - a more complex and potentially more lucrative form of processing.
Mr. Gilmore said the bank decided to focus on these types of credit card transactions rather than the broader market because of its "high growth potential."
"A lot of experts predict that market will grow rapidly and will outpace, and eventually be larger than, the current credit card market," Mr. Gilmore said.
Thomas McCandless, a regional bank analyst with PaineWebber, described commercial card processing as being in the "embryonic stages." The upside of the business is huge, he said.
Mr. McCandless believes CoreStates is perhaps the bank best suited to "handle the payment systems of the future, especially on the corporate side."
Observers also say the bank has proven its integrity as a third-party processor by not going after its banking clients' own corporate customers.
Although the three companies have processed "millions of other banks' customer transactions," CoreStates has "never compromised the integrity of that data," said Sandra Peterson, senior vice president of strategic planning and marketing for QuestPoint.
In a report at the analyst meeting last month, Mr. McCandless said the development of CoreStates' various third-party transaction processors, coupled with its "significant competitive advantages, should begin to contribute handsomely to earnings during the next five years."
He said it "underscored the importance and profound business transition underway at CoreStates."
Such accolades are welcomed by Mr. Gilmore, a 15-year veteran with the $23 billion-asset bank who has been deeply involved in strategic planning.
Before joining CoreStates, Mr. Gilmore worked briefly as director of systems planning with American Express, after he had served as an assistant vice president with the Federal Reserve Banks in Philadelphia and Atlanta.
At the Fed, he participated in system and operations planning, communication systems design, and electronic transaction processing.
Mr. Gilmore joined CoreStates in 1980 to develop data processing and communications systems. In 1985 he was assigned responsibility for all of the bank's technology activities.