The number of financial institutions using outsourcing services for all of their core processing dropped by a few percentage points in 1992, a recent study found.

But the study, issued by Mentis Corp., Eden, Md., found that demand for selective outsourcing services remained high among larger institutions. Mentis surveyed more than 2,000 commercial banks and thrifts in the U.S.

The banking research firm found that 44% of commercial banks and 75% of thrifts used a service bureau or a facilities manager to handle their core processing applications in 1992, compared with 47% of banks and 80% of thrifts using third-party computer services in 1991.

While these numbers appear to point to an overall decline banks' consumption of outsourcing services a significant decline in outsourcing is evident only among the nation's smallest-financial institutions.

Last year about 26% of banks and thrifts with under 50 million in assets reported that they owned and operated their core banking systems themselves, up from 5% in 1991.

The more than 6,000 financial institutions with 50 million in assets or less represent about 44% of the nation's banks and thrifts.

Mentis Corp.'s president, James B. Moore, said more flexible and affordable hardware and software options have persuaded many of these institutions to run their own systems.

Help with Mergers

At the larger and more influential institutions, however, there is a diffefent story.

Many banks with more than $1 billion in assets are engaged in mergers and acquisitions that result in huge systems-conversion projects. While some financial institutions can handle these projects on their own, an increasing number are looking for help from outsourcing vendors.

Other large institutions are also using third party computer services for selective businesses.

NationsBank Corp. is the largest example of an institution engaging in both of these practices.

Some industry observers believe that the days have passed when the country's biggest banks, like First Fidelity Bancorp. and Continental Bank Corp., hand over all their data processing to a third party.

Nonetheless, the Mentis study found that outsourcing is alive at many large institutions.

The most obvious evidence that the percentage of $4 billion plus thrifts handling their own core processing dropped from 88% in 1991 to 65% last year.

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.