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AIM Evaluation: The Leading Providers of

U.S. Core BankingSystems

FEBRUARY 2019

Christine Barry
David Albertazzi

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TABLE OF CONTENTS
IMPACT POINTS..................................................................................................................................... 5
INTRODUCTION..................................................................................................................................... 6
METHODOLOGY............................................................................................................................... 6
AIM INTRODUCED ................................................................................................................................. 7
AIM COMPONENTS.......................................................................................................................... 7
AIM.............................................................................................................................................9
THE MARKET ....................................................................................................................................... 12
KEY MARKET TRENDS............................................................................................................................12
KEY DRIVERS AND CHALLENGES OF REPLACEMENT .......................................................................17
KEY PURCHASING FACTORS ................................................................................................................19
KEY FUNCTIONALITY..............................................................................................................................19
KEY STATISTICS AND PROJECTED IT SPENDING.....................................................................................21
ANNUAL REVENUE ESTIMATES ANALYSIS..........................................................................................21
CLIENT BREAKDOWN BY TYPE .............................................................................................................22
NUMBER OF NEWCONTRACTS SIGNED..............................................................................................23
FORECAST MOMENTUM ANDIT SPEND ..................................................................................... 24
DEPLOYMENT OPTIONS ANALYSIS ......................................................................................................27
VENDOR COMPARISONS ................................................................................................................... 29
AIM EVALUATION ................................................................................................................................ 39
THE AIM COMPONENTS ANALYSIS.............................................................................................. 39
THE AIM RECOGNITION ................................................................................................................ 40
ADDITIONAL AWARDS................................................................................................................... 42
VENDOR PROFILES ............................................................................................................................ 43
CSI................................................................................................................................................... 43
FINASTRA................................................... ................................................... .................................... 46
FIS ................................................ ................................................... ................................................ 51
FISERV................................................... ................................................ ........................................ 56
JACK HENRY............................................................................................................................................60
VSOFT................................................................................................................................................ 65
EMERGING VENDORS................................................................................................................... 67
REGIONAL VENDORS.................................................................................................................... 68
INTERNATIONAL VENDORS WITH U.S. PRESENCE ................................................................... 70
CONCLUSION ...................................................................................................................................... 71
RELATED AITE GROUP RESEARCH............................................................................................................72
ABOUT AITE GROUP........................................................................................................................... 73
AUTHOR INFORMATION................................................................................................................ 73
CONTACT........................................................................................................................................ 73

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LIST OF FIGURES
FIGURE 1: AIM METHODOLOGY.............................................................................................................................. 7
FIGURE 2: AIM KEY COMPONENTS......................................................................................................................... 8
FIGURE3:SAMPLEASSESSMENTVIAHEATMAPREPRESENTATION................................................................. 9
FIGURE4:SAMPLEAIM .................................................................................................................................10
FIGURE 5: CUSTOMER-CENTRICITY AS THE CATALYST TO THE DIGITAL TRANSFORMATION JOURNEY..........16

FIGURE6:CREATINGANAPIECOSYSTEM........................................................................................................... 17
FIGURE7:FACTORSFORANDAGAINSTREPLACEMENT ................................................................................... 18
FIGURE8:KEYFUNCTIONALITYTRENDS............................................................................................................. 20
FIGURE9: NUMBER OF FINANCIAL INSTITUTIONSIN THE UNITED STATES..................................................... 21
FIGURE10:ANNUAL REVENUEESTIMATESBREAKDOWN ................................................................................ 22
FIGURE 11: AVERAGE NEW CLIENT WINS............................................................................................................ 23
FIGURE12:BREAKDOWNOFRECENTU.S.COREREPLACEMENTSBYINSTITUTIONTYPE............................. 24
FIGURE13:FORECASTNUMBEROFNEWCONTRACTSSIGNED ....................................................................... 25
FIGURE14:ESTIMATED SPENDONNEWCOREBANKINGSYSTEMSBYU.S.FINANCIALINSTITUTIONS....... 26
FIGURE15:BANKANDCREDITUNIONCOREBANKINGSPENDBYASSETCLASS............................................ 26
FIGURE 16: BREAKDOWN OF VENDOR BANK CORE CLIENT PORTFOLIOS BY DEPLOYMENT ENVIRONMENT
............................................................................................................................................................. 27
FIGURE17:BREAKDOWNOFVENDORCREDITUNIONCORECLIENTPORTFOLIOSBYDEPLOYMENT
ENVIRONMENT............................................................................................................................................. 28
FIGURE 18: BREAKDOWN OF 2018 DEPLOYMENTS............................................................................................ 28
FIGURE 19: VENDOR MARKETSHAREIN THEUNITEDSTATES............................................. ............................. 37
FIGURE 20: TOTAL NUMBER OF LARGE AND MIDSIZE BANK CLIENTS.............................................................. 37
FIGURE21:AVERAGENEWCORECONTRACTSSIGNED .................................................................................... 38
FIGURE 22: AIM COMPONENTS ANALYSIS BY HEAT MAP.................................................................................. 39
FIGURE23:U.S.COREBANKINGAIM............................................................................................................41

LIST OF TABLES
TABLE A:THE MARKET........................................................................................................................................... 12
TABLEB:THETHREESTAGESOFDIGITALTRANSFORMATION ......................................................................... 15
TABLEC:VENDORCORECLIENTBASEBYFINANCIALINSTITUTIONTYPE ....................................................... 22
TABLE D: BASIC VENDOR INFORMATION ............................................................................................................ 29
TABLEE:BASIC PRODUCT INFORMATION........................................................................................................... 29
TABLEF:PRODUCTTECHNICAL INFORMATION.................................................................................................. 30
TABLE G: CLIENTSERVICE SUPPORT.............................................................................................................................31

TABLEH:PRODUCTDEPLOYMENTOPTIONS...................................................................................................... 32
TABLEI:FRONT-ENDTECHNOLOGYSUPPORT ................................................................................................... 33
TABLEJ:CHANNELSOLUTIONS............................................................................................................................ 33
TABLEK:PAYMENTSOLUTIONS........................................................................................................................... 34

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TABLE L: BUSINESS INTELLIGENCE, AND DOCUMENT AND CHECK PROCESSING...............................35

TABLE M: LENDING SOLUTION .......................................................................................................... 35
TABLE N:FRAUD/COMPLIANCE SOLUTIONS................................................................................... 36
TABLE O: KEY STRENGTHS AND CHALLENGES—CSI ..............................................................................46
TABLE P: KEY STRENGTHS AND CHALLENGES—FINASTRA...................................................................51
TABLE Q: KEY STRENGTHS AND CHALLENGES—FIS...............................................................................55
TABLE R: KEY STRENGTHS AND CHALLENGES—FISERV........................................................................60
TABLE S: KEY STRENGTHS AND CHALLENGES—JACK HENRY ..............................................................64
TABLE T: KEY STRENGTHS AND CHALLENGES—VSOFT.........................................................................67
TABLE U: LEADING GLOBAL CORE VENDORS WITH U.S. PRESENCE............................................ 70

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IMPACT POINTS
• Coresystemsandthetechnologiesthatsupportthemcontinuetobeahighareaof focus for financial
institutions with complexity and high risks/costs often associated with theirreplacement.

• LeveragingtheAiteImpactMatrix(AIM),aproprietaryAiteGroupvendor
assessmentframework,this ImpactReportevaluates theoverall competitive position
of each vendor, focusing on vendor stability, client strength, product features, and
clientservice.

• The following criteria were applied to develop a list of eligible vendor participants:
(1) bank awareness of the vendor as a provider of a viable core banking offering, (2)
successfulimplementationofacorebankingsolutionataminimumofoneU.S.-
based financial institution, and (3)the ability to provide clientreferences.

• AtotalofsixvendorsagreedtobeevaluatedundertheAIMframework.Several
additional vendorsarenamedasemergingcompetitors,non-U.S.providers vyingfor a larger
presence in the U.S. market, and/or small regional players.

• The U.S. core banking vendorlandscape is a mature one. Most of the technology
providersareestablishedvendorswithstrongfinancialsandbroadproduct
portfolios. There are high barriers to entry; however, a few new players have
emergedoverthelastfewyearsinanefforttodeliversomethingdifferenttothe market to better
address changing market needs.

• Several trends are shaping the present and future core systemsmarket and the
ways inwhichtheleadingtechnologyprovidersmustservetheirbankclients.Trends
include rising competition from new players and expectations around user experience,
a sustained preferenceforhosted systemsand growing preference for private clouds, IT
modernization being architected around integration, customer-
centricitybeingthecatalysttothedigitaltransformationjourney,andthecreationof application
program interface (API) ecosystems.

• Thenumberofnewcorebankingsystemcontractscontinuestogrow.AiteGroup
forecastsaslightincreaseinmomentumoverthenextthreeyearsandatotalIT spendofoverUS$6
billionbetween nowand year-end2020.Approximately 637U.S.
financialinstitutionswillsigncontractsfornewcorebankingsolutionsduringthat
time.

• Achievingbest-in-class status and contender status inAiteGroup’sAIM, a highly

governed and quantitative vendor evaluation methodology introduced via
this report,areFiserv,JackHenry,andFIS.AdditionalawardsincludeCSIforthebest
user experience and FIS forthe most advanced API strategy.

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INTRODUCTION
AiteGroupanalystshavebeenstatingforquiteawhilethatitistimeforfinancialinstitutionsto
replacetheantiquatedandinefficientcoresystemsthatcontinuetorunbehindthescenesat many
institutions. These systems make it difficult for banks to address new customer needs and
expectations for speedandagility,andmakeit challengingto compete intoday’sfierce
environment. The perceived risks associated with a full core system transformation have held
several institutions back, but fortunately, technological enhancements, more open and
componentizedarchitectures,andphasedreplacement strategiesareenablingmoreinstitutions to
move forward with the core system replacements they have put off forfartoo long.

This Impact Report explores some of the key trends within the U.S. core system
replacement marketanddiscusseshowtechnologyisevolvingtoaddressnewmarketneedsandchallenges.
ThisImpactReportalsocomparesandcontraststheofferingsandstrategiesoftheleading
vendorsandhighlights theirprimarystrengthsandchallenges.Finally,tohelpfinancial
institutions make more informed decisions as they select new technology partners, the
report recognizes specific vendors for their strengths in critical areas.

METHODOLOGY
Leveraging theAIM, a proprietaryAiteGroup vendorassessment framework,this Impact Report
evaluatestheoverallcompetitivepositionofeachvendor,focusingonvendorstability,client
strength, product features, and client services.

The following criteria were applied to develop a list of vendors for participation:

• Bank awareness of the vendor as a provider of a viable core banking system offering

• Successful implementation of a core solution at a minimum of one U.S.-based

financial institution and the ability to provide client references

Participating vendors were required to complete a detailed product request for information
(RFI) comprisingbothqualitativeandquantitativequestions,conductaproductdemoandbriefing,
and provide active client references.

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AIM INTRODUCED
TheAIM is a comprehensive proprietary vendor evaluation process designed toprovide a holistic
analysis of participating vendors and identify market leaders in each evaluated vendor market.
By incorporating many aspects of a vendor’s essential characteristics for success and growth,
including financial and client stability, product features, and customer service, the AIM provides
anactionableguideformarketparticipantslookingforviablethird-partyvendorsolutionsand services.
Figure 1 highlights the key stages of the AIM methodology.

Figure 1: AIM Methodology

RFI distribution, client interviews, and market

analysis analysis

Aggregationof Vendor
RFI collection
and trend
and demos
distribution analysis analysis

Develop Analyze key Collectvendor Check data Evaluate

vendor RFI market trends, data availability
Confirmed criteria
survey market Rank vendors
Analyze participants accuracy Project vendor
and client competitive View vendor Interview market growth
surveys landscape demos client

house Aite Populate

Group vendor
knowledge
database

Source: Aite Group

Toensure full transparency in terms of key areas of measurement and evaluation, Aite Group
sharestheentireAIMwitheachvendorpriortopublication.Eachparticipatingvendoralso provides
clientreferences to measure their overall satisfaction. Details of the client reference
survey and questions to be discussed with clients are shared with each participating vendor prior
totheinterviews.AiteGroupreservestherighttoidentifyandinterviewotherclients thatmay not be
recommended by participating vendors to validate certain areas of analysis.

AIM COMPONENTS
The AIM has four key components: vendor stability, client strength, product features, and client
services.Examples of the criteria that could be included in each component are listed in Figure 2.

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Figure 2: AIM Key Components

•
• Numberofemployees
• •

•
• Riskmanagement
• Office presence • Client turnover
• Financial stability • Vendorreputation
Vendor Client
stability

AIM

Client

•
• Key features
• Implementationoptions service
• Easeof user experience • Training programs
•
• Online support
integration • Pricing structure
•

Source: Aite Group

VENDORSTABILITY
The vendor stability component evaluates the overall strength of the vendors in terms of
financial stability, managementreputation, risk management, and global presence. This
component determines whether a given vendor has the basic foundation to compete and
sustain its overall market presence.

CLIENTSTRENGTH
The client strength component focuses on the number and diversity of customers for vendors,
vendorreputation among the clients, and overall customer turnover.This component measures
whether a given vendor has a strong foundation of clients and a robust client pipeline to sustain
its growth trajectory.

PRODUCTFEATURES
The product features component analyzes the key features and functionality of vendor solutions
and services, including implementation options, user experience, and the strength of the future
product roadmap. This component measures whether the vendor offers enough key features
and functionality to remain competitive.

CLIENTSERVICES
The client services component evaluates the comprehensive nature of the vendor’s client
support and service infrastructure. This component measures whetherthe vendor provides
robust service and support to provide real value to the clients.

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AIM
Aftera comprehensiveanalysis,AiteGroupcanassessparticipatingvendorswithin the four key
evaluation components (Figure3).

Figure 3: Sample Assessment via Heat Map Representation

Vendor Client Client Product

Vendors
stability strength service features

Vendor 1 81% 65% 81% 84%

Vendor 2 69% 70% 83% 88%

Vendor 3 86% 61% 81% 88%

Vendor 4 89% 91% 92% 91%

Vendor 5 81% 74% 92% 82% Legend:

BEST IN CLASS
Vendor 6 86% 96% 81% 82% 91% - 100%

Vendor 7 78% 78% 92% 90% 81% -90%

Vendor 8 89% 87% 81% 84% 65% -80%

INCUMBENT/
Vendor 9 69% 61% 89% 88% < 65%
EMERGING
Vendor 10 86% 74% 75% 85%

Source:AiteGroup

TheAIM leverages these four components to create a concise composite evaluation that
identifies market-leadingvendors:

• Vendor strength: Combiningthe scores from the vendor stability andclient strength
components,thiscriterionmeasuresthevendor’soverall long-termbusiness
viability as a product and service provider.

• Productperformance:Combiningthescoresfromtheproductfeaturesandclient services
components, this criterion measures the product’s ability to deliver key
functionality and support.

Figure 4 provides a sample output of the AIM, presenting those market-leading vendors that
provide robust product performance and that showcase their ability to execute on their long-
term strategies.

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Figure 4: Sample AIM

Product

Vendor 10
Vendor 6
Vendor 1

Vendor 3
Vendor 8 Vendor 5

Vendor 4 Vendor 2 Vendor 9

Vendor 7

Vendor strength

BEST IN CLASS

CONTENDERS

INCUMBENT/EMERGING

Source: Aite Group

The AIM highlights three specific types of vendor groupings as a result of the analysis:

• Bestin class:Vendors in thisgroupingrepresent theleaders in theparticular vendor

market,withstrongfinancials,diverseclientbases,androbustproductofferings
with industry-leading functionality and reliable client service. These are essentially the leading
vendors that everyone else is chasing.

• Contenders: Contenders have created stable businesses and client bases as well as
competitiveproductofferings.But they struggleattimes toidentify the next big market trend or
product features, or they lack consistent research and development or IT investment, leading to a
failure to update overall performance and
infrastructure. Contenders’ overall competitive positions will vary a bit, from
vendorsthatarehavingatoughtimekeepingupwiththebest-in-classvendors—
due to a lack of resources or stable but outdated technology stacks—to vendors that arejustinchesaway
fromjoiningthe best-in-class groupingif only they could
properly execute on the next release or successfully capture a new client segment.

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• Incumbentoremerging:Thislastgroupingrepresentsvendorsthateitherhavea
largepotentialforfuturegrowthorareestablishedvendorswithstagnating
offerings.This group may represent startups or vendors with limited resources. They
mayexhibitunstablebusinessmodels,lowclientcount,andlimitedclientservice
capabilities.However,thisgroupofvendorsmayalsosupportinnovativeproduct
features and transformative business models that will help them hone in on the AIM framework.

Therelativepositionsofvendorsthathavebeenbucketedintothesethreedistinctvendor
groupingswithintheAIMare,ofcourse,notstatic.Infact,anemergingvendoroftodaymay, given the speed of
innovation in recent years, find itself in the best-in-class grouping five years from now.

ThebeautyoftheAIMisthatbyleveragingthisframework,AiteGroupanalystscanpinpoint vendors’ strengths and

weaknesses, and vendors can utilize this framework to make sure they areontherightpathtoreachingthecovetedbest-
in-classposition.TheflexibilityoftheAIMis also designed to be beneficial for those financial institutions looking to
make vendor decisions tied to their unique set of internal requirements.

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THE MARKET
This section provides information and analysis around the following:

• Key market trends

• Key drivers and challenges of adoption

• Key purchasing factors

• Key functionality

KEY MARKET TRENDS

The following market trends are shaping the present and future core banking system market
and thewaysinwhichtheleadingtechnologyprovidersmustservetheirbankclients(TableA).

Table A: The Market

Market trends Market implications
Rising competition Some fintech disruptors are marketing their solutions directly to consumers
from new andsmallbusinessesandareenteringthemarkettomeettheirbanking needs in new and
players and unique ways, pressuring financial institutions to transform their business model.
expectations around userOther
experience
industries, such as the retail sector, have already impacted customer expectations
and set new standards for customer experience. Financial institutions have no choice
but to place the customer and user experience at the heart of every ITdecision.

Sustained preference Thesustained preference for hosted core banking solutions and growing preferencefor
forhostedsystemsand privateclouds isa trendthat has continuedtopickup
growingpreference for momentum.ThisshifthasbeendrivenbyadesiretoreduceoverallIT
private clouds footprint,lowerthetotalcostofownership,increasespeedtomarketof
newproducts,andshiftinternalITstaff’sfocustorevenue-generating initiatives instead
ofinfrastructure.

IT modernization As the need for data in banking continues to grow, it is creating manageability
architected around issues for legacy systems: Operational risk, increases in agility, and the need to
integration generate insights are pushing financial institutions
tomodernizetheirITandbetterrespondtodigitalbusinessdemands.
Integration sits at the center of it all.

Customer-centricity as Customer-centricity is the catalyst of the digital transformation journey. In

the catalyst to the thelongterm,this transformationwill createopportunities forfinancial institutions to
digital transformation better serve and deepen relationships with customers while also operating more
journey efficiently and effectively.

Creating a unified Mostfinancial institutionsarestill intheearlystagesofdeterminingAPI use cases. While

API ecosystem they recognize the benefits for internal system integration
anddataexchangewithvendors,theyarestillworkingtowardcreatingan entire unified
APIecosystem.

Source: Aite Group

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RISING COMP ETITION FROM NEW PLAYERS AND EXPECTATIONS AROUND

U SE R EX PE R IE NCE
Demandsandexpectationsarounduserexperienceinbankingarerising.Otherindustries, such as
the retail sector, have already impacted customer expectations and set new standards in the
areaof customerexperience.Bankshavenochoicebuttoplacethecustomeranduser
experience at the heart of every IT decision. The challenge for most financial institutions is that
ITbudgetsareincreasingly lockeddownby compliance andlegacymaintenanceprojects,thus
reducingtheircapacitytoinnovate.Thisforcesthemtoprioritizetheirinitiatives.Assuch,a handful of
technology categories are receiving the greatest level of attention and investments
today.Theseinclude regulatory compliance, fraud prevention,analytics, and digital
channels/transformation. User experience sits in the center of all of them and has become a
key consideration in almost every IT decision financial institutions make.

The digital revolution has also given rise to a proliferation of digital-only banks. These new
players, called “neobanks” or “challenger banks,” interact with their customers over the online
and mobile channels only.They can be independent fintech startups or even digital spinoffs of
existingbanking groups. Usingmodern technology andbeingunhindered by legacy systems,
neobankshavedifferentiatedtheirofferingfromthatoftraditionalbankingbyfocusingonthe
customerexperience.Bydoingso,neobanksarebetterabletoactonthetrendthanare
incumbent financial institutions.

SUSTAINED PREFERENCE FOR HOSTED SYSTEMS AND GROWING

PR EFE RENCE FOR RPR IV A TE CLOUDS
The sustained preference for hosted core banking solutions and growing preference for private
clouds isnot anewtrendbut onethathas continuedtopickupmomentumoverthelastfew years.
Aite Group analysts first observed this trend with point solutions, such as online banking and
cash management solutions, about a decade ago and saw it carry overto the core space a
fewyearslater.Itisalsoadeploymentoptionthatwasatfirstmorehighlyfavoredbybanks,but today
is increasingly seen among credit unions.

The shift toward hosted solutions and private cloud-based solutions has largely been driven by
a desire for thefollowing:

• Reduced overall IT footprint with minimal installation or software upgrade

• Lower total cost of ownership

• Faster deployment/speed tomarket

• Less of a staffing burden

• Moretimetofocusonbankingactivities,withthetechnologyfocusshiftingbackto
providingvaluetocustomersanddifferentiatingthecustomerexperiencerather
than focusing on infrastructure

• Lower regulatory burden

• Higher levels of business continuity through vendor-run backup data centers

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As a result, financial institutions don’t need all the hardware and resources they once did,
freeinguptimeandallowingITstafftofocusonrevenue-generatinginitiativesinstead.
Additionally, parameter-driven solutions enable higher levels of customization without touching
code;thus,hosteddeploymentsenjoyalevelofcustomizationtheyoncedidn’t,coupledwith
the ability to take advantage of all new releases.

IT MODERNIZATIONARCHITECTE AROUNDINTEGRATION
Over the years, financial institutions have built big technology stacks that are monolithic and
difficult to change. Legacy systems form an integral part of their value chain, and while some
systemsare beingreplaced, a completeoverhaul ofthis value chain isunrealistic.The older,less
flexible platforms upon which those legacy systems were built make integration and data
accessibilitydifficult.Thispreventsfinancialinstitutionsfromhavingasinglesourceforclient
dataandresultsindataconsistencychallengesandtheneedtoaskcustomersforthesame
information multiple times—which is frustrating for customers. Additionally, some systems are
real-timewhile others are batch, further complicating bank goals tocreate a real-time
environment.

Integration challenges are especially great for the financial institutions that buy most of their
technology from multiple best-of-breed technology providers. Their efforts to offer best-in-class
capabilities to customers have worked against them when it comes to customer experience. In
anidealworld,a bankwouldbe ableto select asinglevendorandrequireallother vendor partners
to easily plug into its back-end systems.Regional and some super-regional banks are
typically among the financial institutions hardest hit by integration challenges. While the largest
multinational banks are not immune to it, they are more likely to havemany homegrown
solutions and the resources to invest to make their processes more seamless and their portal
experiences more user-friendly. On the other side of the spectrum, smaller community banks
and credit unions are also less challenged in this area, as they typically use fewer vendors
and depend primarily on their core banking vendor to meet most of their technology needs.
Such practices make them likely to havea more consistent experience across products. Financial
institutionsneedtomodernizetheirtechnologyandcenteritaroundintegrationinorderto achieve their user-
experiencegoals.

While striving to modernize their IT and better respond to digital business demands, financial
institutions should consider the following to truly modernize:

• Reduce operationalrisk: Legacy technology means a higher exposure to risk,

especially due toextensive and unique levels of customization and the declining lack
ofknowledgewithinthebusinessastohowsuchcomplexsystemswork.Thisis particularly
the case in the areas of operational risk and security.

• Increase agility: Financial institutionsneed to bemore responsive tochanging

market conditions and digital demands from the business. Setting up their third-
partynetworkstoincreaseinnovationwillbeparticularlyeffective.Financial
institutions need to gain more expertise in agile development and operations skills,
and to leverage the opportunities presented by API management.

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• Generate insights: Financial institutions need to cope with increasing amounts

of data in a variety of formats. An effective data management approach is
essential to deliveringcompellinginsightsatscale.Financialinstitutionsshouldleverage
regulationssuchasGeneralDataProtectionRegulation(GDPR,whichisstartingin
Europe but is rapidly expanding globally) as an opportunity to fund technology that
will enable deeper customer understanding.

CUSTOME R-CENTRICITY AS THE CATALYST TO THE DIGITAL

T R A N SF O R MA T ION JO U R N EY
ITtransformationisnotanewtrendbutonethathasbeengrowinginprevalenceoverthelast few years
as more modern, flexible technology solutions have been introduced to the market.
Phased approaches enable institutions to adopt a less risky technology transformation by first
replacing the most urgent areas. Most financial institutions, especially the largest banks, are
taking a progressive approach in theirrollout of new technology solutions. In a phased approach,
some choose a specific geographic area, while others base their phases on vertical domains
or departments.AiteGroup defines the three stages of digital transformation inTableB.

Table B: The Three Stages of Digital Transformation

Stage Definition
1. Today’s reality: Different Many financial institutions have different customer experiences
channelsactindependentlyin silos. and products depending on the channel and the business unit,
whereby the knowledge and operations exist in functional silos
contributing to brand dilution. Furthermore, most architectures
consist of a mix of architecture types (on-premises or Software-
as-a-Service [SaaS]), in-house-oriented services, and legacy
technologies that further contribute to the silos.

2. The short-term goal: Some cross- The interim step is to develop some channel-agnostic services,
channel capabilities act aspart leadingtoproductsynergies.Manyinstitutionsovercomethe
ofthe same brand. challenges of legacy systems and different architectures by
exportinginformationfromthemintoacloudplatformand,from there,
serving information to their customers. This enables greater
data consistency and a better experience.

3. The aspiration: Aunified and Banking customers experience the brand, not the channel, with
seamless experience one organization servicing all channels. There is a single view
constitutes thebrand. of the customer across all channels and better use of analytics
and channel preferences.

Source: Aite Group

Whiletransformingthefinancialinstitutiontodeliverthetypeofexperiencecustomersexpect can be a lengthy and

costly endeavor, successfully doing so promises to be a win-win scenario for
bothfinancialinstitutionsandtheircustomers.Customer-centricityisthecatalystofthedigital
transformationjourney.Inthelongterm,thistransformationwillcreateopportunitiesfor financial institutions to
better serve and deepen relationships with customers while also operating more efficiently and
effectively (Figure 5).

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Figure 5: Customer-Centricity as the Catalyst to the Digital Transformation Journey

Know your customer.

Customer-centricity

Foster innovation and open-platform collaboration.

Fintech partnerships Improve go-to-market effectiveness.
transformation

Acceleratetimetomarketwhileretainingsecurity.
Agile development IncreaseAPI consumption and openplatform.

Adopt new technologies and sourcing models.

Digital

New technology stack Accelerate IT changes.

Break up cultural, technological, and operating silos.

Workforce evolution Redeploy and acquire new IT talent.

New operating model and banking paradigm

Source: Aite Group

CREATINGAUNIFIEDAPIECOSYSTEM
AnAPI strategy is viewed as table stakes forfuture success. The idea of APIs is not new within the banking and
payments industries. They have been used to connect with vendors for some time,andinmany
instances,theyareakeytoolforinternal infrastructureorchestration
between disparate platforms and services.

Financial institutions are looking for new ways to leverage increasingly standardized APIs to
deliver and share information more directly within their own organizations, with partners, and
even with customers. Other drivers for financial institutions to create an API strategy include the ability to build
once and use many times, as well as the belief that it will lead to greater
operational efficiency across the organization (i.e., common taxonomy, common infrastructure, common
security,reusability).

Financial institutionsalso seeAPIs and software development kits (SDKs) as away to provide a better user
experience fortheir customers because the technology enables financial institutions to more easily deliver
information to their customers and the external systems those customers
use.Manyinstitutionsenvisionhavingacentrallocationthatcustomersanddeveloperscan
easily access and that houses all of their APIs. For those that do not yet have a unified and
centralized ecosystem for API-driven services, this is likely to occurin the future, due to broader market demands
(Figure6).

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Figure 6: Creating an API Ecosystem

Source: Aite Group

KEY DRIVERS AND CHALLENGES OF REPLACEMENT

Themarketandcustomerneedsarechangingatafasterratethaneverbefore,leavingmost banks with little choice but
to replace their antiquated core systems. New systems provide real-
timecapabilitiesandcentralizedcustomerinformationfiles,andopenarchitecturesrequire
financialinstitutionstobeabletomoreeasilyintegratewithandleveragethenewcapabilities offered by third-party
providers. Figure 7 identifies the factors that are contributing to
replacement as well as those that pose challenges for vendors attempting to penetrate additional
prospects.

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Figure 7: Factors for and Against Replacement

Source: Aite Group

Drivers for replacement are as follows:

• Outdated systems at most banks that don’t meet new market expectations:
It is notunusualforafinancial institutiontoberunningacorebankingsystemputin
place 20 to 30 years ago. Such systems not only look dated but also run on
outdated technologyandprogramminglanguages,suchasCobol,whichmakethemexpensive
tomaintain.Additionally,findingprogrammersfamiliarwithCobol isbecoming
increasingly difficult.

• Desire for open platforms:Banks are increasingly finding that they can’t go atit
alone. A growing number of banks are not only leveraging multiple products
from traditional technology providers but are also considering partnerships with newer
fintech providers. Newer, more open platforms enable easier integration with
these third-party solutions and capabilities through the use of APIs.

• Needforgreaterflexibility andfastertime tomarketofnewproducts andservices:

Customer needs are evolving at a growing rate, and financial institution
systems needtobeabletokeepup.Newcoresystemsoffergreaterflexibilitytoease
creation and rollout of new capabilities and products. In today’s competitive banking
market, speed and agility offer a huge competitive advantage.

• Desireforacentralizedcustomerinformationfile:Asbankingproductsbecome
commoditized, customer experience has become a major point of differentiation
for many financial institutions. Further, as consumers leverage technology more
and more in their personal lives, they are increasingly expecting the type of
personalized experience they get from online retailers to also be offered by their banks and credit

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unions.That level of customization and ability to easily analyzean end user’s specific needs requires
a centralized customerinformation file, something older systems do not deliver.

Challenges slowing down replacement for some banks follow:

• Cost and risk:Acoresystemreplacementis likely tobethemostexpensiveIT initiativeafinancial

institutionwillevertakeon.Thatfactor,coupledwiththe
importanceofthesystemanditsimpactonabank’sabilitytorunandperformdaily bankingtransactions,
causesmanybanks toproceedwithcautionwhenconsidering a systemreplacement.

• Other IT priorities and limited budgets: Most banks, especially smaller ones, have
limitedITbudgets,forcingthemtoprioritizeandoftentableinitiativestheywould like to move forward
with.

• Inertia and comfort with existing systems and processes: Change is never easy and requires
strongcommunicationfromthetopdowntoget all affectedpartieson board.Some banks embrace
such communication, while others do not.

KEY PURCHASING FACTORS

While there are many reasons to purchase a new core banking system, the following factors represent
buyers’ key considerations when evaluating solutions:

• Real-time capabilities

• Modern and flexible API-enabled architecture

• Scalability and stability

• Componentization, not customization—the ability to customize without touching code, which prevents
institutions from taking new releases easily; banks want to be protected from themselves

• A well-thought-out and forward-thinking product roadmap that addresses expected market needs and
aligns with the financial institution’s strategy

• A vendor culture that aligns with that of the bank or credit union

KEY FUNCTIONALITY
Whenitcomestokeyfunctionality,asetofminimumrequirementsmustbemettosustainthe basic needs of the
clients.These minimum requirements are typically the same across regions and are found in nearly all vendors
in the market.

In order to increase overall adoption and capture additional market share, vendors are focused on developing
competitive differentiators. Competitive differentiators might not be attractive to
allpotentialclientsbutaredrivingkeyclientadoptionandcouldmeanthedifferenceforthose

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banks or credit unions looking for specific functionality needs.Features noted as next-
generation functionalitiescouldbecomethestandardindustrypracticeoverthenextfewyears;onthe
other hand, they could be completely ignored. Given the limited resources within each
vendor, it isimperativethatappropriateinvestmentsaremadeacrosstheneedsofpast,current,and
future clients (Figure 8).

Figure 8: Key Functionality Trends

•
• Modern look and feel •

• Customizable dashboard • Fully API-enabled machine learning

based onrole and favorites architecture • Fintech ecosystem
• •

information file • Embedded analytics

• Fully integrated suite of • Highlycustomizable
products beyond core,
•
enabling acore provider to
be the primary technology architecture
provider for banks if they choose
this strategy
Minimum requirement: Basic functionality
considered competitive requirement

might not be required by all potential clients, but could

mean the difference forthose banks
looking for specific functionality needs

Next generation: Ambitious functionality that could

become the standard industry practice within the next
few years; on the otherhand, it could be completely ignored

Source: Aite Group

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KEY STATISTICS AND PROJECTED IT SPENDING

This section provides information and analysisonkeymarket statistics aswell asprojected IT
spending related to the vendor market.

While the number of bank failures has slowed in recent months, the number of U.S. financial
institutions has declined from 17,527 institutions in 2005 to 11,022 in 2018, largely as a result
of mergers and acquisitions, the costly burden of regulation on smaller financial institutions,
and a challenging economic environment (Figure 9).

Figure 9: Number of Financial Institutions in the United States

NumberofFinancialInstitutionsin the United States, 2005 to 2018

8,832
8,681
8,533
8,305
Banks
8,695 8,012
8,362 Credit unions
7,657
8,101
7,357
7,806 7,083
7,554
6,812
7,339 6,656
7,094
6,819 6,182
6,554 5,913
6,273 5,670
5,542
6,090
5,785 5,696
5,480

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: FDIC, NCUA, Aite Group

ANNUAL REVENUE ESTIMATES ANALYSIS

TheU.S. corebankingvendorlandscapeisprimarily composedofestablishedplayerswithstrong
revenuestreamsandfinancialviability.Theyaretheprimarytechnologyprovidersformostof
theirbankclients,therebyrequiringthemtohavenotonlyafeature-richcoreofferingbutalsoa
fullportfolioofotherintegratedproductsandservices.Mostofthesevendorsadoptabest-of-
suitestrategy.Thoughseveralnon-U.S.-basedcoreprovidersandahandfulofemergingplayers
aretryingtoenterthisspace,itisanindustrywithhighbarrierstoentry,givenbanks’focuson vendor
experience and a proven track record. Among the six leading vendors fully profiled in this
report, four generate greater than US$500 million in annualrevenue (Figure 10).

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Figure 10: Annual Revenue Estimates Breakdown

Breakdown of Leading Core Vendors by Annual Revenue

(N=6)

Less than US$50

million
1

Between US$50
million and
US$500 million 1

Greater than
US$500 million 4

Source: Vendors

CLIENT BREAKDOWN BY TYPE

Mostofthetechnologyprovidersprofiledinthisreporttargettheircorebankingsystemsatall sizes of banks;
however,theirlevels of success within each asset segment often vary.Several
vendors havemultiple core offerings targeted at financial institution segments. TableC provides
a high-level snapshotofeach vendor’s success selling coresystems to each ofthe key financial
institution segments.

Table C: Vendor Core Client Base by Financial Institution Type

Large banks Midsize banks Small banks Community Credit
(greater than (US$10 billion to (US$5 billion to banks (less than unions
US$30 billion in US$30 billion in US$10 billion in US$5 billion in
assets) assets) assets) assets)
CSI

Finest

FIS

Fiserv

Jack Henry

VSoft

Source: Vendors

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NUMBER OF NEW CONTRACTS SIGNED

U.S.banksare facinggrowingpressuretoreplace their core systems.Thus,many vendors have
seen a consistent number of new contracts signed, as well as a number ofrequests for
proposals receivedoverthelastfewyearsamongtheirprimarycoresystems.Whilethetotalnumberof
contracts signed has slightly increased or decreased since 2013, it has remained close to 200
during each year (with the exception of 2016, when it had a slightly larger decline). 2018
appears to be no different, with the estimated number of new contracts signed at 209.

Figure 11 shows responses from the leading U.S. vendors when asked for the number of new
U.S. bank and credit union clients at each point in time.

Figure 11: Average New Client Wins

Number of New Core Banking Contracts Signed With Leading U.S. Core
Vendors, 2013 to e2018

236

2013 2014 2015 2016 2017 e2018

Source: Vendors

Bankscontinuetoberesponsibleforthemajorityofcoresystemreplacementsandsigned approximately 70% of the

new core contracts with leading vendors in 2018 (Figure 12). Credit unions are also active in the replacement
market, especially those looking for more business-specific capabilities, but they demonstrate a lower tendency
to replace their core solutions and providers than banks. This is largely due to fewer solution options and
satisfaction with existing platforms.

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Figure 12: Breakdown of Recent U.S. Core Replacements by Institution Type

BreakdownBetweenBanks and Credit Unions for New Core Banking Contracts

Signedby U.S. Core Vendors, 2016 to e2018

e2018

2017

2016

Banks Credit unions

Source: Aite Group

FORECAST MOMENTUM AND IT SPEND

The trend to replace core systems is expected to continue in a steady flow from prior years,
increasing slightly during 2019 and 2020. Among the leading core technology providers profiled
in this report, many reported to Aite Group analysts that they are seeing an increased number of
U.S. banks in the market for a new core solution compared with two to three years ago. While
the need to replace exists, the cautious pace financial institutions exercise for core replacements is likely
toremain.

Based on theirfeedback and our own knowledge of the market,Aite Group forecasts 640 U.S.-
based banks and credit unions will sign a new core banking system vendor contract between 2018 and 2020
(Figure 13).

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Figure 13: Forecast Number of New Contracts Signed

Projected Core Banking Contracts for Leading U.S. Core Vendors, 2017 to e2020

217

214
213

209

2017 e2018 e2019 e2020

Source: Aite Group estimates

Given the slightly lower number of core contracts signed during 2018, Aite Group estimates that
the11,022banksandcreditunionsintheUnitedStatesspentroughlyUS$2.24billiononnew
corebankingsolutionsin2018,adecreaseof1.8%from2017.Thisonlyincludesnewcore
contract hardware and software costs and does not include investments in existing systems. It alsoassumesonly
standardfunctionality is includedandexcludes costsoverandabovethebase licensefees,sosubstantialmodificationsand/
orcustomizationsarenotincluded.Itdoesnot
includeanyancillaryservicesoroptionalsystems,suchasdigitalbankingchannels,payments
systems,remote deposit capture, or banking security initiatives, as these typically belong to
otherproductlines.The total corebankingspendamongU.S.-basedbanksandcreditunions is
expectedtoreachoverUS$2.3billionby2020,withhigherratesofgrowthin2019and2020 (2.4% and 1.4%,
respectively; Figure 14).

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Figure 14: Estimated Spend on New Core Banking Systems by U.S. Financial Institutions

U.S. Bank and Credit Union Core Banking Spend, 2017 to e2020

$2.328

$2.296

$2.285

2.4%
$2.243 1.4%

-1.8%

2017 e2018 e2019 e2020

Total online banking spend (In US$ billions) Year-over-year percentage change

Source: Aite Group estimates

The100largest banks intheUnitedStates (rankedbyasset size)will spendmorethanUS$815 million on core

banking in 2018. U.S. banks with US$10 billion to US$30 billion in assets won’t spend nearly as much, investing
just US$314 million in core banking. In turn, the smaller banks
withlessthanUS$10billioninassetswillspendatotalofUS$926million,withcreditunions spending the remaining at
US$188 million (Figure 15).

Figure 15: Bank and Credit Union Core Banking Spend by Asset Class

Bank and Credit Union Core BankingSpend by AssetClass, e2018

(In US$ millions)

$815

Large U.S. banks Midsize U.S. Small U.S. banks Community U.S. U.S. credit unions
with more than with between
banks
banks
withwith less
US$30 billion in between US$10 US$5 billion and than US$5 billion
assets billion and US$30 US$10 billion in in assets
billion in assets assets

Source: Aite Group

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DEPLOYMENT OPTIONS A NALYSIS

Finally,whendeployingthosesolutions,themajorityofbanksandcreditunionswillselecta hosted/
on-demand option. An overall market shift in favor of hosted/on-demand deployments
hasbeenobservedforthelastfewyearsandisexpectedtocontinue.Infact,withtheexception of the 20
largest U.S. banks, most financial institutions prefer such a deployment over licensing
thesolutionandrunningitin-house.Hosteddeploymentsoftenleadtofastertimetomarket,
lower capital expenditures, and the ability to remain on new releases.

Approximately70%ofthebanksrunningoneofthemajorcoresolutionsprofiledinthisreport
arerunningitinahosted/on-demandenvironment,comparedto48%in2011(Figure16).A
similartrendisseenamongcreditunions,thoughtheshifttohostedenvironmentsisslightly
slowergiventhelowervolumeofnewdeployments.Approximately53%ofcreditunions
running one of the major core solutions profiled in this report are running it in a hosted
environment compared to just 29% in 2011 (Figure 17). Given the strong preference for
hosted deployments in the U.S. market, all of the vendors profiled in this report provide this
deployment option, with most offering both hosted and licensed environments.

Figure 16: Breakdown of Vendor Bank Core Client Portfolios by Deployment Environment

Total Bank Core Deployment Environments, 2011,

2015, and 2018

48% Hosted/ASP
65%
70%

Licensed
52%
35% 30%

2011 2015 2018

Source: Vendors

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Figure 17: Breakdown of Vendor Credit Union Core Client Portfolios by Deployment
Environment

Total Credit Union Core Deployment Environments, 2006, 2011,

and 2015

29%

50% 53% Hosted/ASP

71% Licensed
50% 47%

2011 2015 2018

Source: Vendors

In 2018, at least 95% of the new core system contracts signed by banks have been for a hosted deployment,
while at least 70% of those signed by credit union have (Figure 18).

Figure 18: Breakdown of 2018 Deployments

2018 New Bank and Credit Union Deployment Environments

Banks 5% 95%

Credit unions 30% 70%

Licensed SaaS/Hosted

Source: Aite Group estimates

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VENDOR COMPARISONS
This section presents comparative data and profiles forthe individual vendors that participated
intheAIMevaluation.Thisisbynomeansanexhaustivelistofvendors,andfirmslookingto
undergo a vendor selection process should conduct initial due diligence prior to assembling a list
of vendors appropriate for their unique needs. Table D presents basic vendor information for the
participating solutions.

Table D: Basic Vendor Information

Company name Headquarters Year founded Primary U.S. core banking target
market
CSI Paducah, Kentucky 1965 Community to regional banks

Finest London 2017 Community banks and credit unions

FIS Jacksonville, Florida 1968 Community to regional to large banks

and credit unions

Fiserv Brookfield, Wisconsin 1984 Community to regional to large banks

and credit unions

Jack Henry Monett, Missouri 1976 Community to regional to large banks

and credit unions

VSoft Atlanta 1996 Community banks and credit unions

Source: Vendors

TableEpresentshigh-levelproductinformation.Newversionreleasesarebecomingmore
frequentasagrowingnumberofvendorsadoptagiledevelopmentmethodologies.

Table E: Basic Product Information

Firm Primary core system Launch date Current version Frequency of new
product name(s) version releases
CSI NuPoint 2008 N/a Twice per year

Meridian 2008 18.05 Three times per year

Finest Fusion Phoenix 1993 2017 Once per year

FIS IBS 1980 N/a Four times per year

Horizon 1989 2018.06 Twice per year

Profile 1980 7.6.1 Twice per year

Systematics 1977 218-181 Twice per year

Fiserv DNA 1995 4.4.1 Three times per year

Premier 1978 9.2 Twice per year

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Firm Primary core system Launch date Current version Frequency of new
product name(s) version releases
Precision 1991 18.0 Twice per year

Signature 1983 18.1 Twice per year

Cleartouch 1982 2018 R2 Twice per year

Jack Henry SilverLake System 1988 July 2018 Twice per year

Episys 1985 2018.06 Twice per year

Core Director 1999 Release 2018 Once per year

CIF 20/20 1990 2018 Twice per year

VSoft Wings (replacing 2010 5

Twice per year
CoreSoft)

Source: Vendors

TableFpresentshigh-level technical informationassociatedwitheach product.For more

detailed information, banks should consult individual vendors.

Table F: Product Technical Information

Vendor Product Core architecture Programming language(s) used
CSI NuPoint Privatecloud-basedofferingvia Visual Basic .NET, C#, COBOL,
SaaS architecture Java, J2EE, XGEN (4th
Generation Language), ALGOL

Meridian Service-oriented architecture Visual Basic .NET, COBOL,

(SOA) ASP.NET, Java, C#

Finest Fusion Phoenix Open architecture using the Microsoft .NET Visual Basic.NET, Microsoft SQL,
framework Extensible Markup Language (XML),
C#

FIS IBS Combination of IBS and DB2 Java, COBOL, C++

databases accessible via a defined
services layer to open systems,
browser-based front-end application
and user interfaces

Horizon Open architecture based on the RPG, Java, JavaScriptoveraDB2

IBM iSeries platform Universal DataBase

Profile Client server C+, Java, M

Systematics IBM System z and Unix/Linux COBOL

composed of IBM z/OS,

Linux/Unix, Oracle/SQL Server, and
DB2 LUW

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Vendor Product Core architecture Programming language(s) used

Fiserv DNA Oracle database integrated to .NET, HTML5, REST, Angular 5
.NETN-tieruserinterface,and
HTML5withREST-basedservices

Premier N-tieredsystemsusingbrowser-based COBOL, .NET, Progress Open

user interfaces and rich-client Edge
applications

Precision N-tieredsystems,usingarich client Progress Open Edge, C#, .NET

desktop application

Signature N-tiered systems using browser- RPG, .NET

baseduserinterfacesandsmart-client

Cleartouch N-tieredsystemsusingasmart- Cobol, Algol and .NET

clientportalandapplications

IBM Power System with i RPG Free Form and RPG IV

Jack Henry SilverLake
System operating system

Episys IBM AIX, client/server Java, C, PL/1

Core Director Windows server-based C# and Synergy D/E

CIF 20/20 IBM Power System with i RPG Free Form and RPG IV
operating system

VSoft Wings (replacing Web-based application Java, JavaScript, and HTML

CoreSoft)

Source: Vendors

Table G presents vendors’ standard client service offerings. Most provide a breadth of offerings.

Table G: Client Service Support

Vendor Service-level Online issue Single point 24/7 Online User working
agreement tracking of contact support training groups/
customer forum
CSI

Finest

FIS

Fiserv

Jack Henry

VSoft
ÿ ÿ

Source: Vendors
Key: ÿ = Yes; ÿ = No

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TableHpresentseachvendor’sabilitytosupportvariousdeploymentoptions.Asmentioned
previously,allofthevendorsofferahostedon-demandoptionwithinatleastoneoftheir core
offeringsgiventheobservablestrongbankandcreditunionpreferenceforthatenvironment.
Some top 20 banks as well as a few regional players continue to prefer a licensed deployment, so many of the
vendors also offer that option.

Table H: Product Deployment Options

Vendor Product Licensed/on-premises Hosted/on-demand

CSI NuPoint ÿ

Meridian

Finest Fusion Phoenix

FIS IBS ÿ

Horizon

Profile

Systematics

Fiserv DNA

Premier

Precision

Signature

Cleartouch ÿ

Jack Henry SilverLake System

Episys

Core Director

CIF 20/20

VSoft Wings (replacing

CoreSoft)

Source: Vendors
Key: ÿ = Yes; ÿ = No

Most of the core solutions available in the market are either smart-client or browser-based (Table I).

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Table I: Front-End Technology Support

Vendor Product Thick client Smart client Browser-based
CSI NuPoint

Meridian

Finest Fusion Phoenix

FIS IBS

Horizon

Profile

Systematics

Fiserv DNA

Premier

Precision

Signature

Cleartouch

Jack Henry SilverLake System

Episys

Core Director

CIF 20/20

VSoft Wings (replacing

CoreSoft)

Source: Vendors

Asstatedpreviously,mostfinancialinstitutionsbeyondthelargestonesoftenlooktotheircore
providerstobetheirprimarytechnologypartner.Assuch,breadthofproductportfolioiscritical.
TableJ,TableK,TableL,TableM, and TableN compare the breadth of each of the leading vendor’s product
portfolios in critical areas.

Table J: Channel Solutions

CSI FIS window Fiserv Jack Henry VSoft
Digital corporate ÿ
cash management

Digital small- ÿ
business banking

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CSI FIS window Fiserv Jack Henry VSoft

Digital consumer ÿ
banking

Portal solution ÿ ÿ

Digital consumer ÿ
onboarding

Digital treasury
onboarding

Tier-1 call center

Branch platform and

teller application

Interactive Voice
ÿ ÿ
Response (IVR)

Chatbots
ÿ ÿ ÿ ÿ

Source: Vendors

Key: ÿ = Homegrown; ÿ = Acquired through acquisition, ÿ= Available through third-party providers

Table K: Payment Solutions

CSI Finest FIS Fiserv Jack Henry VSoft
Debit card processing ÿ ÿ ÿ ÿ

ATM driving ÿ ÿ ÿ ÿ
and processing

EFT switching ÿ ÿ ÿ ÿ

Credit card ÿ ÿ ÿ ÿ
processing

Open-loop prepaid ÿ ÿ ÿ ÿ
card processing

Closed-loop prepaid ÿ ÿ ÿ
card processing

Loyalty and reward ÿ ÿ ÿ ÿ

program
management

Merchant acquiring ÿ
and processing

Bill payment ÿ ÿ ÿ

Person-to-person ÿ ÿ
payments

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CSI Finest FIS Fiserv Jack Henry VSoft

Payment hubs ÿ ÿ

Real-time payment ÿ ÿ ÿ
solution

Source: Vendors

Key: ÿ = Homegrown; ÿ = Acquired through acquisition, ÿ= Available through third-party providers

Table L: Business Intelligence, and Document and Check Processing

CSI FIS window Fiserv Jack Henry VSoft
Predictive analytics for ÿ ÿ ÿ ÿ
cross-sell

CRM ÿ
ÿ ÿ

Chief executive officer ÿ

(CEO)/board dashboard

Account analysis

Document imaging ÿ ÿ ÿ ÿ

Check imaging ÿ ÿ

Item processing ÿ ÿ

Remote deposit capture ÿ ÿ

Mobile capture ÿ ÿ ÿ

Branch capture ÿ

Integrated receivables ÿ ÿ ÿ

Source: Vendors

Key: ÿ = Homegrown; ÿ = Acquired through acquisition, ÿ= Available through third-party providers

Table M: Lending Solution

CSI FIS window Fiserv Jack Henry VSoft
Consumer loan
ÿ ÿ
origination

Small-business loan
ÿ ÿ ÿ
origination

Commercial loan
ÿ ÿÿ
origination

Consumer mortgage ÿ ÿ
processing

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CSI FIS window Fiserv Jack Henry VSoft

Consumer loan ÿ

servicing/collections

Commercial loan
ÿ
portfolio management

Loan modification

Source: Vendors

Key: ÿ = Homegrown; ÿ = Acquired through acquisition, ÿ= Available through third-party providers

Table N: Fraud/Compliance Solutions

CSI Finest FIS Fiserv Jack Henry VSoft
ID verification ÿ ÿ ÿ

Biometrics
ÿ ÿ ÿ
authentication

Predictive analytics ÿ ÿ ÿ ÿ
for fraud prevention

Deposit fraud ÿ

Card fraud ÿ ÿ ÿ ÿ

Positive pay

Online fraud
ÿ ÿ
mitigation

Enterprise fraud ÿ ÿ
management

Anti-money ÿ ÿ
laundering

Source: Vendors

Key: ÿ = Homegrown; ÿ = Acquired through acquisition, ÿ= Available through third-party providers

Fiserv remains the dominant leader in the U.S. core banking market, with more than 4,000
(38%) ofU.S.-basedfinancialinstitutionslivewithoneofitscoreofferings.Ithasbeenabletomaintain
thisshareandevengrowitslightlydespiteashrinkingpotentialcustomerbasemainlydueto
mergersandacquisitions.Infact,mostoftheleadingplayershaveseenlittlechangeintheir
marketshareinthelastfewyears(Figure19).Foramoredetailedanalysisofvendorclients,
please refer to the Vendor Profiles section.

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Figure 19: Vendor Market Share in the United States

Estimated VendorMarketShare AmongU.S.FinancialInstitutions (Total U.S. financial
institutions at mid-2018=11,022)

Other
25%

Fiserv
38%
COCC
1%

CSI
4%

Finestra
4%

FIS
12% Jack Henry
16%

Source: Aite Group

While Fiserv enjoys the largest share of the market,FISis the clearleaderin the UnitedStates
among large (greaterthan US$30 billion in assets) and midsize (between US$10 billion and
US$30 billion in assets) banks (Figure 20).

Figure 20: Total Number of Large and Midsize Bank Clients

Number of Large (greater than US$30 billion assets) and Midsize (between US$10 billion and
US$30 billion assets) U.S.-Based Core Clients

FIS 78

Fiserv 26

Jack Henry 7

Finest 1

CSI 0

Source: Vendors

Finally, Jack Henry is showing strong growth within its client base and has
averaged approximately44newcoreclientsduringeachofthelastthreeyears(Figure21).

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Figure 21: Average New Core Contracts Signed

Average Numberof New U.S.Core ContractsSigned Overthe Last Three Years

Jack Henry 44

FIS 24

CSI 17

Finest 7

Fiserv N/A

Source: Vendors

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AIM EVALUATION
This section will break down the individual AIM components, drawing out the vendors that are
strong in each area and how they are differentiated in the market.

THE AIM COMPONENTS ANALYSIS

Figure 22 provides an overview of how each vendor scored in the various areas of importance.
Each vendor is rated, in part, based on its own data provided when responding to the RFI
distributedbyAiteGroupaswellasonproductdemosandfollow-updiscussionsaspartofthe
AIMprocess.Ratingsare alsodrivenby theexaminedvendors’reference customers tosupporta
multidimensional rating.

Figure 22: AIM Components Analysis by Heat Map

Vendor Client Client Product
Vendors
stability strength service features

CSI 91% 66% 93% 61% Legend:

BEST INCLASS
Finest 92% 58% 85% 65% 91% - 100%

FIS 98% 72% 88% 83% 81% -90%

Fiserv 93% 95% 84% 89% 65% -80%

INCUMBENT/
Jack Henry 93% 83% 94% 76% EMERGING < 65%

Vsoft 82% 41% 90% 77%

Source: Vendors, Aite Group

VENDORSTABILITY
Thecore bankingvendorlandscapeis astableone, composedofestablishedplayerswithstrong
financials,growthrates,andreinvestmentinresearchanddevelopment.Notsurprisingly,all
vendors profiled in this report score well in this area. FIS edged out slightly ahead of its
competitors due in part to its strong financials, its continued revenue growth, and the strength
of its managementteam.

CLIENTSTRENGTH
Thecorebankingspaceisextremely competitive.Further,giventheexpensesandperceivedrisk
associatedwith core systemreplacement, sales cycles are oftenextremely long.Fiserv scores
highestinthiscategoryasaresultoftheoverallsizeofitsclientbase,itsbreadthacrossall
financial institution asset segments, and its ability to consistently sign on a high number of
new coreclientsrelativetoitscompetitors.Thevendoralsoscoreshighforitsmarketreputation.

CLIENTSERVICE
The scoring of this category largely depends on vendor-provided information on service-level
agreements and provided support as well as on client feedback about each vendor’s ability to

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deliveronpromisesandprovidehighlevelsofserviceaswellasapositivecostvalue.Those
scoringhighestinthiscategoryalsohavestrongcustomeradvisoryboards. JackHenry cameout
ontopinthiscategoryasaresultofitsstrongclientbase,highlevelofcustomerinvolvement
fromitsmanagementteam,focusonservice,andclientswhofeeltheirrequestsarebeing addressed.

PRODUCTFEATURES
While this category considers feedback from clients regarding the robustness and breadth of the
functionalitywithineachofthevendor’scorebankingofferings,italsomeasuresimportant factors,
sucheaseofupgradesandsupportforcustomizations.Fiserv ledthefieldinthis
category based on strength in those areas.

THE AIM RECOGNITION

To recap, the final results of the AIM recognition are driven by three major factors:

• Vendor-provided information based on Aite Group’s detailed AIM RFI document

• Feedbackfromparticipatingvendors’ clientreferencesand/orfeedback sourced independently by

AiteGroup

• Analysis basedon market knowledge and product demos provided by participating

vendors

Figure 23 represents the final AIM evaluation, highlighting the leading vendors in the market.

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Figure 23: U.S. Core Banking AIM

Internationalvendors: Accenture,

Oracle, SAP, TCS, Temenos

Product Regional vendors: COCC,

Nymbus

Vendor strength

BEST IN CLASS

CONTEND ERS

INCUMBENT/EM ERGI OF

Source: Vendors, Aite Group

B E S T - IN - C L A S S V E N D O R : F I S E R V
This award is in recognition of a vendor’s overall experience in the core banking market,
including total client base, overall client growth, and recent successes. Fiserv leads the pack
from a total-number-of-deployments standpoint. There are more than 4,000 financial institutions
live onitsvariouscorebankingofferings.Fiservhastheabilitytomeetmany(ormost)ofafinancial
institution’s technology and service needs. This is especially important to smaller institutions
thatlooktotheircoreproviderstobetheirprimarytechnologypartners.Premiercontinuesto represent
the largest number of clients for Fiserv, and DNA continues to see great momentum in the credit
unionspace.

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LEADERSOFTHECONTENDERS:JACKHENRYANDFIS

Jack Henry and FIS both offer extensive core processing capabilities as well as a full suite of
ancillary products, such as end-to-end payments,risk management, and a fullrange ofretail
and corporate digital bankingofferings.

INCU MB ENT /EMERGING

This field is becoming increasingly crowded with competition from strong regional, international,
andemergingvendors.Someoftheseplayersaregrowingtheircustomerbaserapidlyand raising
the customer experience bar.

ADDITIONAL AWARDS

BESTUSEREXPERIENCE:CSI

CSI’s newly redesigned core banking platform stands out from its competition as a result of
its modernlookandfeel,graphics,andinnovativewayofdisplayingbankingrelationships.

MOSTADVANCEDAPISTRATEGY:FIS
FIS’CodeConnectoffersthemost advancedAPIplatformandenvironment oftheleadingU.S.
coreproviders.ItisnotonlybeingusedinternallybyFISbutisalsobeingleveragedbythird-
partyproviders.ItprovidesahubforFISclientsforAPIdevelopmentandtesting,aswellas comprehensive guides,
developers’ documentation, frequently asked questions,and testing services.

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VENDOR PROFILES
ThissectionprovidesprofilesofvendorsthathaveparticipatedinthisAIMevaluation:CSI,
Finastra,FIS,Fiserv,JackHenry,andVSoft.Thekeystrengthsandchallengesofeachvendorare
presented in TableO, TableP,TableQ, Table R, TableS, and TableT.

CSI

Paducah, Kentucky-based CSI was founded in 1965 and has approximately 1,100 employees.
It offersawidevarietyoftechnologyservicestoU.S.financial institutionsofmanysizes.In
addition to core processing, it offers solutions to address banking needs in regulatory
compliance, document services, managed services, payments processing, digital banking,
and cloud-based hosting and security.

AITEGROUP’STAKE

CSIoffersthemarketabroadportfolioofproductsandservicesthattightlyintegratewithitstwo coresolutions
targetedatbanks:NuPointandMeridian.Overtheyears,CSIhasmade
substantial investments in its infrastructure that serve as the foundation for hosting and
deploying secure private cloud services as well as transforming its core product offerings into a service-oriented
architecture. Customers can subscribe tomore than 50 cloud services fortotal integration with loans, deposits,
time deposits, financial management, card services, ACH,
paymentsprocessing,imaging,boardreporting,digitalbanking,riskmanagement,and
compliance, as well as a long list of complementary products and services and approved third-
party vendors.

In addition to itsSaaScloud solutions, CSI offers an Infrastructure-as-a-Service model for CSI

affiliate companies and best-of-breed business partners for faster integration. More recently, the
vendorhasmadesignificantenhancementstotheuserexperienceofbothofitscorebanking
platforms. Tight integration across its product set is a key driver for many banks selecting this
vendor.BecauseofitsSaaSoffering,CSIdoesnotmaintainmultiple versionsofthe product.This strategy
vastly improves support, maintenance, and compliance of the core banking products.

Theregularupgradestothetwoplatformsledtomajorchangestothemiddletierandfrontend
ofthesolution,implementinganSOA,andconsistentdevelopmenthascontinuedsincethe
launch of the products.

BASICFIRMANDPRODUCTIN FOR MA TION

• Headquarters: Paducah,KY

• Launched: 1965

• Number of employees:1,100

• Ownership and annualrevenue:CSIispubliclytradedonthePremierQXtierofthe

OTCMarketsGroupInc.underthesymbolCSVI.CSI’srevenueforfiscalyear2018—
endingFebruary28,2018—wasUS$249.6millionandrose6.2%comparedto

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US$234.9 million for fiscal 2017. Net income for fiscal year 2018 was US$38.8
million, a 25.6% increase compared to the fiscal 2017 net income of US$30.9 million.

• Nameofcorebankingsolutions:CSIofferstwocoresolutionstothemarket—
NuPoint and Meridian.

• Target customer base: Both core banking solutions are targeted solely at banks:

• NuPoint core solution is primarily targeted at full-service community or commercial banks that
desire the flexibility of a cloud-based, parameterized, flexible banking platform. It offers
numerous integrated solutions and services, with many third-party connectivity options
available as well. It is only available in a hosted/service-bureau environment.

• Meridiancoresolutionisprimarily targetedatmoretraditional community

banks. While this solution also offers the flexibility of a parameterized, flexible banking
platform, it is designed to offer a one-stop solution to banks desiring a more simplified
operating environment and vendor management. It is offered in a hosted or licensed
environment.

• NumberofU.S.-basedclients:Thereare420bankslivewithoneofCSI’score banking offerings.The

core systemclient base can bebrokendown as follows:

• Large banks (greater than US$30 billion in assets): Zero

• Midsize banks (US$10 billion to US$30 billion in assets): Zero

• Small banks (US$5 billion to US$10 billion in assets): One

• Community banks (less than US$5 billion in assets): 419

• Credit unions: Zero

• Number of new core system clients: CSI averages about 17 new core system client
wins per year.

• 2015: 21

• 2016: Seven

• 2017: 22

• First half of 2018: 10

• Implementation options: NuPoint can be deployed in an ASP/on-demand

environment only. Meridian can be deployed in either an ASP/on-demand or on-premises/
licensed environment. Among its client base, 322 are in an ASP/on-demand environment,
while 97 are licensed.

• The three products and services offered by the company seeing the greatest
demandbybanks:Mobilebankingapp,managedservices,andfraudanomaly detection

• The products and services offered by the company seeing the greatest demand by
credit unions: Notapplicable

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• Average number of company products (in addition to core) used by

core customers: CSI’scorecustomers useanaverageof65CSI products.

• Approximate size (total assets)oflargestcorebanking customerdeployed inan

ASP/on-demand environment: US$7.1 billion

• Largestnumberofconcurrentusersitsmostscalablecoresystemissupportingfor
a bank in a live implementation: 1,125

SOLUTIONUSABILITY
In2018,CSIwentthroughanextensiveuser-interfaceredesign.Theredesignisuser-friendlyand is
described by its clients as easy to navigate. The dashboard page, which is the first touch point
after login, brings together the features that banking employees use most often. This page acts
as a launching pad that provides access to many features from one place. The tiles on the page
arelogicallyorganizedintomaincategories:customerengagement,customerexperience, business
analytics, and loan administration, to name a few.

Dashboards, analytics, strong reporting capabilities, and integration into Microsoft Outlook
further enhance the user experience. The solution also includes a series of dashboards that
incorporateagreatdealofanalytics,enablinguserstoviewimportantmetrics,customer
interactions, and transactions.

CSI’s newly redesigned core banking platform clearly stands out from its competition as a result
of its modern look and feel, graphics, and innovative way of displaying banking relationships.

TOP PRODUCT DEVELOPMENT INITIATIVES COMPLETED OVER THE LAST

12 MONTHS
• NuPoint:Digitalbankingplatform,integratedcampaignmanagement,and
omnichanneldigital account onboarding

• Meridian:Replacedcustomerrelationshipsystemwithnewsystem,BSALinksrisk
rating and exception tracking, and teller capture

TOPPRODUCTDEVELOPMENT INITIATIVESFORTHENEXT 1 2 MO NTHS

• NuPoint: CSI Bridge API marketplace, integrated device platform (ATMs
andself-service kiosks), and advanced account analysis

• Meridian:NuFundonlineaccountopening,additionalautomationforBSALinks,and
Master Data Management Structure for Advanced Reporter

AP I S T R A T E G Y

In August 2018, CSI introduced CSiBridge, an API platform, to give banks the power to build
customtechnologyintegrations.CSiBridgeprovidesaplatformthatbothCSIbankclientsand
third-partyproviders canusetosecurelyaccessdataforancillarysolutions.CSIbank clients can take
advantage of the open API platform to customize and release new services more quickly
through prebuilt APIs into popular banking features.

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The platform offersAPI integrations into a catalog of CSI’s banking infrastructure, such asABA
verification, account analysis, account opening, cards, demand deposits, loans, imaging, savings,
andwires.Throughthiscatalogofservices,CSIprovidesongoingupdatesintoeachAPI,ensuring thatall
integrationsutilizethemostrecent,secureprogrammingversions.Thecatalogwill expandovertime
toprovide its clientswith the ongoing ability to create customizations.

CLIENTFEEDBACK
OneofCSI’skeystrengthsisthelevelofserviceandsupportitprovidestoitsbankclients.This vendor
consistently gets high scores from clients forits client service and support, its reputation,
andtheaccessibilityofitsmanagementteam.Highlevelsofsatisfactionhaveledtohighclient retention
rates forCSI.Banks often select CSI’s core banking solutions because of its common
culture centered around integrity and openness, team approach to relationship management,
and tightly integrated products. The vendor also gets strong points on user experience and for
becoming increasingly digitallyfocused.

Clientsmentiontheywouldliketoseeenhancedfunctionalityforthecashmanagement solution,
especially in the area of risk management reporting. Another area in which clients
wouldliketoseethevendorimproveoverallisinthespeedofdevelopmentofnewproducts and services.

Table O: Key Strengths and Challenges—CSI

Strengths Challenges
Long-standinganddedicatedfocusonthebank space Lack of proven track record among large financial
institutions

Usability and user experience of the new release Overall product portfolio gaps, including payment processing
beyond debit cards, which can be addressed via
partnerships

Transparentmanagementteamandhigh retention
rates

Source: Aite Group

F INASTRA
Finastra was formed in 2017 by the combination of Misys and D+H. It offers the market
innovative, next-generation technology on its open Fusion software architecture and cloud
ecosystem. It offers a full suite of pre-integrated solutions to over 9,000 customers across the
globe with products spanning retail banking, transaction banking, lending, and treasury and
capitalmarkets.Finastraserves48ofthe50largestbanksgloballyandgeneratesapproximately US$2.1
billion in annual revenue.

U.S. banks and credit unions run one of four distinct core banking solutions offered by Finastra:

• FusionPhoenix is its flagship solution forthe U.S. market and is the only one actively
being sold in the States.

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• Fusion UltraData is still sold and is seeing the greatest interest in Puerto Rico.

• Fusion Intrieve is a solution run primarily by thrifts.

• Fusion Sparak is a solution that has historically been targeted at the lower end of the
community bank market.

Both Fusion Intrieve and Fusion Sparak are in compliant or “mature” mode, with neither actively sold in the
market.As such, the vendor continues to make necessary maintenance
enhancements and ensures regulatory compliance forthe two solutions. They will be maintained as longas clients
continuetorun them,but theexpectation is that thebankswilleventually
migrate onto the more modern and feature-rich Fusion Phoenix platform.

FinastraalsooffersFusionEssence,Midas,andEquationintheglobalmarket.Theyarenot targeted at the U.S.

market and thus will not be considered forthis evaluation.

AITEGROUP’STAKE
FinastraofferstheU.S.marketa real-timemodernandtrueMicrosoft platformfromtopto bottom. It doesn’t have the
largest market share of the U.S. core providers, but its client base is
loyal,withseveralclientsrunningitscoresolutionsformorethan20years.Itsoverallproduct
portfolioisbroadandespeciallystronginlending.Thevendorseesitsstrengthinthelending space coupled with its
ability to handle all types of loans within a single platform to be its
greatest market differentiator. In fact, most recent Fusion Phoenix wins have been of banks and credit unions
requiring strong lending, commercial functionality, and modern, open core banking platform capabilities.

FusionPhoenixhashistoricallybeentargetedprimarilyatbanksandcommercially focusedcredit unions. Recent

enhancements to its capabilities have enabled the vendor to also more heavily
targetallcreditunions,includingthosewithoutacommercialfocus.Thevendorwillcontinueto
focusonthecreditunionmarketoverthecomingmonthstogrowandexpandthebreadthofits
clientbase.CreditunionsliveonFusionPhoenixarehappywiththeplatformandarehelping Finastra to get more credit
unions on board.

Fusion Phoenix’s built-in workflow manager is a differentiator in the market. Clients have
leveraged it to create many workflows to improve efficiency and streamline their processes. It
allows common tasks and processes in the core to be defined and automated, ensuring policies
and procedures are maintained, and consistency is applied each time a business process is
initiated.Thatresultsintheabilitytoreduceriskandfinancialoutput,reduceemployeetimeon mundane tasks, and give
customers or members a consistent experience.

Finastra clients haveexperienced a great dealof change overthe last fewyears as the company has changed
hands from HarlandFinancialSolutions toD+H toFinastra.Given the company’s
headquartersandstrengthinEurope,itisnosurprisethatseveralclientshaveexpressed
concerns about the vendor’s commitment to the U.S. market. Major efforts by the management
team,aswellaslargeinvestmentsintoitsU.S.products,suchasFusionPhoenixandFusion
UltraData, since the creation ofFinastra havehelped toease some concerns.Finastra’s recent acquisition of
Austin-based Malauzai is a critical one forthe vendor’s success in this market. It
notonlyfurtherdemonstratesaU.S.commitmentbutalsoprovidesthevendorwithbest-in-

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class digital capabilities. While the vendor already offered digital banking capabilities through its
Fusion Cavion offering, the Malauzai acquisition will enable Finastra to bring its digital banking
and the digital branch to the forefront.

Theserecentevents seemto haveplacedFusionPhoenix clientsbackonsolidgroundwith

Finastra, which is investing a great deal of money into expanding its core capabilities and
building out its overall value proposition. Additionally, its FusionFabric.cloud initiative will deliver
thelevelofopennessbanksandcreditunionsdesiretodevelopandmoreeasilyintegratewith
third-party platforms.

BASICFIRMANDPRODUCTIN FOR MA TION

• Headquarters: London

• Founded:Finastrawas created inJune 2017 andis theresultofamergerofMisys

and D+H.

• Number of employees: Over 10,000

• Ownershipandannualrevenue:Finastraisapubliclyheldcompanygeneratingan estimated US$2.1 billion in

annualrevenue. More than 15% of company revenue is reinvested in research and development, and
over 65%ofFinastra customers are based in the United States.

• Name of primary core banking solution: As stated previously, U.S. banks run four
distinct Finastra core banking options. FusionPhoenix is its primary core offering for
the U.S. marketplace, run from the Lake Mary location in Florida.

• Target customer base: Primarily small banks and credit unions

• Number of U.S.-basedclients: There are 260 U.S.-basedbanks and 174 U.S.-based

credit unions live with one of Finastra’s core banking offerings. Of those institutions, 83 are
runningFusionPhoenix.Only one has over US$10 billion in assets. Fusion Phoenix users can be
broken down as follows:

• Large banks (greater than US$30 billion in assets): Zero

• Midsize banks (US$10 billion to US$30 billion in assets): One
• Small banks (US$5 billion to US$10 billion in assets): Zero

• Community banks (less than US$5 billion in assets): 73

• Credit unions: Nine

• Other: One

• Number of new core system clients: Finastra averages about seven new
U.S. financial institution core system client wins per year.

• 2015: sevenbanks, onecreditunion

• 2016: five banks, three credit unions

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• 2017: three banks, two credit unions

• First half of 2018: three banks, two credit unions

• Implementationoptions:FusionPhoenixcanbedeployedineitheranASP/on-
demandoranon-premises/licensedenvironment.Approximately70%ofitsU.S.
client base is running it in an ASP/on-demand environment.

• The three products and services offered by the company seeing the
greatest demand by U.S. banks: Fusion LaserPro, Fusion Digital Banking
(powered by Malauzai, a Finastra company), and Fusion Phoenix

• The three products and services offered by the company seeing the
greatest demand by credit unions: Fusion LaserPro, Fusion Phoenix, and Fusion Digital
Banking (powered by Malauzai, a Finastra company)

• Average number of company products (in addition to core) used by core

customers: Nine

• Approximate size (total assets)oflargestcore banking customerdeployedinan

ASP/on-demand environment: US$1.5 billion

• Largestnumberofconcurrentusersitsmostscalablecoresystemissupportingfor a
bank in a live implementation: Morethan5,000concurrentusers,althoughthere is
no systemlimit

SOLUTIONUSABILITY
FusionPhoenix isauser-friendly solutiondescribedby its clientsaseasy tonavigate,particularly
throughitsMicrosoft-styleribbon-baseddesignwhichisintuitiveforusers.Thevendorisalso going to
great lengths to improve the overall usability across its entire product base. Integration
acrossallFinastraproductsisabigareaoffocusforthevendor.FusionPhoenixisanopen
platform that already has strong integration with key products such as Fusion Cavion and Fusion
DigitalBanking (powered by Malauzai, aFinastra company), but the vendor sees opportunities to
createmarketdifferentiatorswithbetterintegrationwithitslendingproducts,suchasFusion LaserPro
and Fusion Mortgagebot. Integration across its product set will be an ongoing initiative
forFinastrathroughout2019.Additionally,theMalauzaiplatformwillactasafrontendforusers to enhance
user experience and perform tasks such as alert enrollment.

TOP PRODUCT DEVELOPME NT INITIATIVES COMPLETED OVER THE LAST

12 MONTHS
• Functionalityenhancements foruniversaldepositandloanservicingaswellas
multitransaction enhancement tells

• Additional support for same-day ACH origination and same-day entry fee

• Middleware open APIimprovements

• WorldPay integration for credit card servicing within Fusion Phoenix applications

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TOPPRODUCTDEVELOPMENT INITIATIVESFORTHENEXT 1 2 MO NTHS

• Workflow managerenhancements

• FusionFabric.cloud platform enablement to create fintech ecosystem

• Enhanced loanservicing

• Electronic signing fordocuments

• Middleware open API enhancements

APISTRATEGY
FusionFabric.cloudisFinastra’sAPImarketplace.Whileseveralexistingbankclientswillcontinue
tointeractwithFusionPhoenixthroughthemiddlewarelayer,FusionFabric.cloudisamore
powerful tool that will be leveraged for creating the fintech ecosystem, providing many
innovative solution options to meet clients’ needs.

CLIENTFEEDBACK
FusionPhoenix is a solid solution often selected forits strong lending and commercial
banking capabilities.Asmentionedpreviously,thecompanyanditsmanagementteamhavegone
through a lot of change over the last few years as a result of merger-and-acquisition activity.
Such change has forced management to spend a great deal of time managing the transition with
alittlelesstimethanusualtofocusoncoreproducts.However,clientsdescribethevendorand
itsmanagementteamasmovingintherightdirectionanddeliveringamessagewithmore
clarity than it has in the past. This messaging is providing clients with greater confidence in the
company’s future direction and roadmap investment. Clients appreciate Finastra’s vision for
easierintegration with third parties and a better overall user experience. They are already
seeing greaterinvestmentintheproductthantheysawfromD&HandHarlandFinancialSolutions.

Overall, clients seem pleased with theFusionPhoenix core platform.Several have chosen
it for itsMicrosoftrootsandfindittobeintuitiveandeasytonavigate.Upgradestonewreleasesare
described by client references as “pretty seamless” and don’t require a lot of regression
testing onthepartofthebanks.WhileclientsarepleasedwiththeFusionPhoenixproductandthe
vendor’slargerproductportfolio,theynoteafewareasinwhichimprovementscanbemade.
Oneclientstatesadesiretoseetighterintegrationwiththemobileplatformandagreaterfocus on
faster payments. The vendor is already beta-testing the latter.
Finastra receives goodoverall scores from users for serviceand support. Itis also described as
delivering on promises forits core offering. Clients have noticed some gaps with other products
in the vendor’s product portfolio, such as within the Fusion Cavion online banking solution, but
as stated previously, they feel that has effectively been dealt with, through the recent
acquisition ofMalauzai.Overall,clientsaresatisfiedwiththeFusionPhoenixproduct,thevendor,andits
ability to meet their needs.

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Table P: Key Strengths and Challenges—Finastra

Strengths Challenges
Strong lending capabilities Severalmanagementchangesoverthelastfew years have
led to client uneasiness and a lower number of new core
contracts signed

PurchaseofMalauzaifordigitalstrengthandan
indicationofthevendor’scommitmenttotheU.S. market

Microsoft platform from top to bottom

Source: Aite Group

F IS

Jacksonville, Florida-based FIS (NYSE: FIS) was founded in 1968 as Systematics and today is a
leadingproviderofcorebanking,paymentprocessing,riskmanagement,outsourcingservices, and
other key technologies to the global financial services industry. It serves more than 20,000
clientsinmorethan130countriesandispartoftheFortune500aswellastheS&P500.The
companygeneratedapproximatelyUS$9.1billioninprocessingandservicesrevenueduringthe fiscal
year ending December 31, 2017.

FIS is one of the most global of the large U.S.-based core vendors, and plans are in place to
continue to build positive momentum. FIS offers the marketplace 13 core systems, nine of
which areofferedtotheU.S.market.Giventhelargeinstallbasesforeachproduct,thevendordoes not
have plans to sunset any of them.

IBS,Horizon,Profile,andSystematicsareitsleadingcorebankingsolutions,responsiblefor
nearly half of its total core clients.

• IBSistargetedatfinancial institutionswithuptoUS$100billioninassets,butits sweet spot

is institutions with between US$1 billion and US$30 billion in assets. IBS is a
comprehensive, highly integrated, and flexible retail and commercial banking
platform that meets each financial institution’s unique go-to-market needs. It is a
fullyoutsourcedsolutionavailable inFIS’ service-bureauenvironment.

• Horizon is FIS’ leading core solution in the community banking market. It provides a
broadset of functionalities for community banks. Its customers benefit from
powerful commercial lending, substantial mortgage capabilities, and private
banking.Horizonisofferedinan in-house, service-bureau,orfacilitiesmanagement
environment;however,closeto80%ofitsusershaveselectedaservice-bureau
environment.

• Profile is a real-time retail and commercial banking application offered to institutions

ofallsizes,butespeciallythelargestones,aroundtheglobe.Profileisavailablein
bothalicensedandanapplicationserviceprovider(ASP)/hosteddeployment
environment.

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• Systematics is offered to large international financial institutions. Systematics is a

multilingual, multicurrency platform available in both a licensed and anASP/hosted
deployment environment, with most clients opting for an on-premises deployment.

AITEGROUP’STAKE
IBS, Profile, and Systematics have the ability to fulfill the needs of financial institutions favoring higher levels of
customization. While Horizon does too, most community banks leverage the bank-ready features built into the
core.

IBS,Profile, andSystematics enable large banks to bring products to marketrapidly through the
useofextensiveparameter-basedconfigurationsuites.Atechnology-savvy customeroneither
corecanalsoleveragetheinnovationFISprovides relativetoits solutionsetofancillary
technologiesthatcomplementthecore,suchassalesandservicechannels,marketinganalytics, mobile banking, online
banking, and a host of payment solutions FIShas integrated throughout its core solutionsets.

Architecturallyspeaking,FIShasfocuseditsdeliveryonanenterprise-widesetofcommon standards that allow for all

cores to leverage all channel technologies via a single integration set.
The result of this focus is a company-wide N-tier architecture for all cores to leverage, which can be inwhole orin
partwhata bank leverages given itsarchitecture—meaningFIScan
complement investments for larger institutions, or function as the primary architecture component for smaller
banks. This inherent open architecture gives banks that place greater value on best-of-breed solutions the
ability to expose integration points, either themselves or
with the help of FIS, to the non-FIS assets they wish to leverage. Inclusive in this capability is not only data for
interoperation but also the ability to provide seamless support of capabilities, such as integrated single sign-on to
the FISecosystem, as well as the ability to extend data integration for warehouse or analytics capabilities
onFISanalytic assets or bank third-party warehouses of choice.

FIShasembarkedonacomponentizedarchitectural strategy thatrepresents itsModernBanking Platform. The platform

comprises a set of components that cover core processing, enterprise
customer, product catalog and pricing, user security and entitlements, operational reporting,
andmicroserviceaccesstotheFISbankingecosystemviaCodeConnect,FIS’APIgateway
enabling the full banking complement. The solution is accessible through the Digital One suite of user interfaces
spanning consumer, mobile, assisted, teller, and back office.

FIS core product suites are often praised for their strong integration within the FIS product
family; thus, they also strongly appeal to traditionalist institutions looking for a single vendor to meet most of their
needs in a seamless, integrated environment.

BASICFIRMANDPRODUCTIN FOR MA TION

• Headquarters: Jacksonville,Florida
• Founded: 1968

• Number of employees:53,000

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• Ownership and annualrevenue:Asa corevendor,FISoffersafull breadthof products

and services capable of meeting most or all of the needs of a financial
institution.Between2%and5%ofcompanyrevenuehasbeenreinvestedin
research and development during each of the last three years.

• Name of primary core banking solutions:IBS, Horizon,Profile, andSystematics

• Target customer base: All banks and credit unions

• NumberofU.S.-basedclients:Thereare1,263banksandcreditunionslivewithone
ofFIS’corebankingofferings.Seventy-eightofitscoreclientshaveoverUS$10
billion in assets. The core system client base can be broken down as follows:

• Large banks (greater than US$30 billion in assets): 41

• Midsize banks (US$10 billion to US$30 billion in assets): 37

• Small banks (US$5 billion to US$10 billion in assets): 37

• Community banks (less than US$5 billion in assets): 909

• Credit unions: 239

• Numberofnewcoresystemclients:FISaveragesabout24newcoresystemclient
wins per year.

• 2015:31

• 2016:20

• 2017:22

• First half of 2018 estimate: 12

• Implementation options:

• IBS:ThesolutionisonlyavailableinanASP/on-demandenvironment; therefore,
100% of its client base is deployed in anASP/on-demand
environment.

• Horizon: Horizon can be deployed in either an ASP/on-demand or an on-premises/

licensedenvironment.Amongits clientbase,79%areinanASP/on-demand environment
while 21% are licensed.

• Profile: Profile can be deployed in either an ASP/on-demand or an on-

premises/licensedenvironment.Amongits clientbase,50%areinanASP/on-
demand environment, and 50% are licensed.

• Systematics:SystematicscanbedeployedineitheranASP/on-demandoran on-
premises/licensedenvironment.Amongitsclientbase,16%areinan
ASP/on-demand environment while 84% are licensed.

• The three products and services offered by the company seeing the greatest demand
by banks: IBS, Horizon, and Profile

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• The three products and services offered by the company seeing the
greatest demand by credit unions: Core processing, mobile banking, and Cardless Cash

• Average number of company products (in addition to core) used by

core customers: FIS’ core customers use an averageof 34FISproducts.

• Approximate size (total assets)oflargestcorebanking customerdeployed inan

ASP/on-demand environment: US$365 billion

• Largestnumberofconcurrentusersitsmostscalablecoresystemissupportingfor
a bank in a live implementation: 10,000

SOLUTION USABILITY
Systemmodernizationandsolutionagilityarefocusareas forFISacross itsvarious solutions.FIS
has deployed FIS Digital One, a platform of integrated banking modules that deliver an
omnichannel banking experience for financial institutions and their customers. Digital One
offers a seamless user experience and real-time access to customer, account, and
transactional data across all bankingchannels.

DigitalOneleveragesanopen,API-basedframeworkandacommoncodebase,thereby
reducingtechnicalinvestmentswhileaddingadditionalcapabilities.Theplatformallows financial
institutionstomodernizetheiruserexperienceinphasesoraltogetherwithafull deployment. These advantages
align with bank strategies, allowing for a truly unified banking experience. In 2019, Digital One will continue
integration into the FISbanking ecosystem via CodeConnectAPIs,furtherenablingaccesstoawiderangeofproductsandservices.

TOP PRODUCT DEVELOPMENT INITIATIVES COMPLETED OVER THE LAST

12 MONTHS
• IBS: Mobile banker platform and remote electronic signature capabilities, data and
advancedanalytics platform,openAPIs tocore, and surrounds forthird-party access

• Horizon: Depositoriginationandteller solution, statisticalaccounting,andsingle

sign-on

• Profile:High-availabilityenhancements,enterprisecomponentintegration,and
additional REST web services inventory

• Systematics: Expanded alert processing, expanded web services catalog and

API enablement, and enterprise componentization and integration

TOP PRODUCT DEVELOPME NT INITIATIVES FOR THE NEXT 12 MO NTHS

• IBS: High-availability infrastructure, next-generation omnichannel sales and service
userexperienceforbankersandconsumers,andservice-enabled,accessible
business analytics and actionable insights

• Horizon: XE bank controls, loan CRA processing, and loan swap processing

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• Profile: Continuedenterprise componentintegrationandcontinuedexpansionof

web services inventory

• Systematics:Intradaydataupdates fordatareporting,studentlending,anddata
accessibilityexpansionwithcontinuedenterprisecomponentintegration

APISTRATEGY
LaunchedinNovember2017,FISCodeConnectisanAPIgatewaythatenablesaccesstothefull
bankingcompliment.Themarketplaceincludesmorethan700APIswithoveranother1,000
APIs in development inareas ofbanking, payments, and consumerfinance. Initial application use cases
includeenterprise customer,mobile andonline banking, and account opening.

FISCodeConnectisacentralizedfintechhubthatgivesbankdevelopersandkeyfintechpartners access to the FISproduct

catalog from one centralrepository.FIS’ Code Connect offers the most advancedAPI platform and environment
of the leading U.S. core providers.

CLIENTFEEDBACK
FISclientsoftenchoosethevendorforitsbroadproductportfolioandtheabilitytohaveasingle
partnerabletomeetmostoftheirtechnologyneeds.Forexample,oneclientmentionsthatit
chose FIS as a technology partner is for its ability to combine the core banking solution, the ATM
switch,thedebitcardmanagementsystem,andthedigitalbankingplatformsfromonevendor
in a practically pre-integrated solution set, thereby reducing the risk and integration time for the financial
institution.

This vendor consistently gets high scores from clients for its reputation, proven technology, and willingness to
listen and to collaborate with customers. Upgrade execution is typically good, and
communicationisalsopraised,withfrequentmeetingsandongoingeffortstoprovidemarket
education to its clients.

Giventhevendor's largesize,itoftentakesalongertimethanexpectedtogetthingsdone.
Therefore,oneareainwhichclientswouldliketoseethevendorimproveoverallisintheability to
deliver on its roadmap, improve execution timelines, and accelerate the speed of
development for new products and services.One client describes struggles with lengthy customizations
of capabilities it believes should be cookie-cutter.

Overall,FISprovidesasolidcorebankingofferingaswellastightintegrationtooneofthe
broadestproductportfolios intheindustry.Thatportfoliobreadthandstrengthinthecore
bankingspacewillenablethisvendortomaintainasolidflowofnewcustomers.Clientsare
generallyoptimisticaboutthefuture,andwhilealladmitthatnovendorisperfect,mostview FIS
as a strong partner and one they plan to stay with in the future.

Table Q: Key Strengths and Challenges—FIS

Strengths Challenges
Globalandlarge-banksuccess,inadditionto 13 core banking offerings
community banks and credit unions

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Strengths Challenges
Strong product portfolio, including end-to-end Notalwaysafirstmoverwithnewcoreproduct
payments capabilities offerings

Financial viability and strong brand

Strength of Code Connect as fintech hub

Source: Aite Group

F ISERV
Brookfield, Wisconsin-based Fiserv Inc. (Nasdaq: FISV) is a global organization serving 12,000
clients around the globe and has approximately 24,000 employees. It is a fintech giant offering
a fullbreadthofproductsinareassuchaspayments,coreprocessing,riskandcompliance,
customerand channel management, commercial services, and insights and optimization. It is a
member of the Fortune 500, and it generated more than US$5.7 billion in revenue during 2017.
Approximately one in three U.S. financial institutions rely on one of its core banking platforms,
thereby providing it with an organic audience for its other offerings.

Fiserv leads the U.S. core vendor market in the total number of core deployments. The vendor
has alsoenjoyed some success overseasand inCanada. It offersbanks andcreditunions 18
distinct core banking offerings targeted toward unique customer bases and available in both
hosted and licensed deployment environments. However, it considers the following to be its
primary offerings that are actively sold in the U.S. market:

• DNA is a real-time retail and commercial banking platform targeted at both banks
andcreditunions.Itwasacquiredthroughthecompany’sacquisitionofOpen
Solutions.

• Premierisknownforitsrobustfunctionalityandscalabilityandistargetedatall banks. Its

clients typically have a strong commercial lending focus.

• Portico is for credit unions seeking robust capabilities, support, and services in an
ASP model to reduce the total cost of ownership.

• Precision is targeted at banks and thrifts.

• Signature is designed forlarge banks and those that require customized solutions.

• Cleartouch is a real-time system targeted primarily at small banks that prefer a

hosted deployment.

AITEGROUP’STAKE

There is no denying Fiserv’s leadership role in the U.S. core banking space from a total
deploymentstandpointaswellasthedepthofitsoverallproductportfolio.Thoseareoftenthe
twoprimaryreasonsfinancialinstitutionspartnerwiththe“orangegiant.”Formost,Fiservis
their main technology provider. The vendor continues to maintain a solid list of new core clients
yearafteryear,enablingittoholdontoitsstrongmarketshare.Whilethemajorityofitsclients

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aresmallbanksandcreditunions,thevendorhas seensuccessacrossallfinancial institutions,

includingsometop50banks.However,likemostofthevendorsprofiledinthis report,its
international footprint remains limited.

Fiserv has grown its presence in the core banking space both organically and through
acquisition. The latter has resulted in it owning 18 distinct core banking solutions. While far
fewerareactively soldinthemarketplace,thevendorwill continuetomaintainallofthe
solutions as long its clients demand them. Running so many cores can lead to some confusion
in themarketastothemostappropriatesolutionforaninstitution.Thevendoraddressesthis
througha unifiedsales strategy across thecores.Fiserv determines internallywhichsolutions
makethe most sense for clients based on their profileand deployment environment
preferences,asopposedtosendingincompetingsalesteams.Fiservenhances,maintains,and
ensures regulatory compliance for multiple solutions but primarily offers two credit union cores
to the market: DNA for those credit unions looking for a highly customizable solution and Portico
forthoselooking formore of anout-of-the-box solutionwitha lowertotal costof ownership.
While current initiatives are making it easier for Fiserv solutions to integrate more easily than
everbeforewithotherthird-partyofferings,thevendoralsooffersafull suiteofsolutions capable
of meeting all or most bank/credit union needs.

Fiserv recognizes that success in today’smarket means solutions havetobereal-time, secure,

efficient, and always up. To that end, its overall core strategy is made up of two major
components.Thefirstcomponentis itsEnterpriseServicesFramework(ESF),whichwasbuiltto
enableanSOAfoundationforAPIintegrationacrossitsownFiservproductsaswellasother
third-party offerings. While integration of products within a single core product family is already
oftentight,integrationacrossotherFiservproductsandwiththird-partyofferingsisgreatly
desired by the market and is something the vendor is focusing on. The second large component
of its strategy is the Fiserv Design Language, through which the vendor aspires to have a
similar lookandfeelacrossallofitsproductsandservices.ResponsivedesignandEngageare
manifestations of this new design and goal of creating a new banker experience. Given
the extreme importance being placed on user experience and the ability to more easily
leverage emerging fintech capabilities within a single ecosystem, these initiatives are
critical steps to enabling Fiserv clients to better compete in today’s marketplace.

BASICFIRMANDPRODUCTIN FOR MA TION

• Headquarters: Brookfield,Wisconsin

• Founded: 1984

• Number of employees:24,000

• Ownership and annual revenue: Fiserv generated US$5.7 billion in revenue

during 2017.Less than10%of company revenue is reinvested in research and
development.
• Name of primary core banking solution: The vendor’s primary cores include: DNA,
Premier,Portico, Precision, Signature, and Cleartouch

• Target customer base: All banks and credit unions

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• NumberofU.S.-basedclients:Thereare4,100U.S.banksandcreditunionslivewith
oneofFiserv’scorebankingofferings.Twenty-sixinstitutionswithinitscoreclient base have over US$10
billion in assets. The core system client base can be broken down as follows:

• Large banks (greater than US$30 billion in assets): Seven

• Midsize banks (US$10 billion to US$30 billion in assets): 19

• Small banks (US$5 billion to US$10 billion in assets): 24

• Community banks (less than US$5 billion in assets): 2,164

• Credit unions: 1,886

• Numberofnewcoresystemclients:Fiservdidnotshareitsaveragenumberofnew
coresystemclientwinsperyear.AiteGroupestimatestheaveragenumbertobe
approximately 35 for banks and 25 for credit unions overthe last fewyears.

• Implementationoptions:Fiserv’scoresolutionsareofferedinbothalicensedand hosted
deployment environment. Among the solutions profiled in this report, all of
themareavailableinbothdeploymentoptions,withtheexceptionofCleartouch, which is
only available in a hosted environment.

• The products and services offered by the company seeing the greatest demand
by core customers: Enterprisecontentmanagement,retailbillpayment,retail internet
banking, branch check capture, and its teller solution

• Average number of company products (in addition to core) used by

core customers:Fiserv’sbankandcreditunioncustomersuseanaverageof
approximately 16 Fiservproducts.

• Approximate size(total assets)oflargest corebankingcustomerdeployedinan

ASP/on-demand environment: The two largest have US$88 billion and US$79 billion in assets,
respectively.

• Largestnumberofconcurrentusers itsmostscalablecoresystemis supportingfor a

bank in a live implementation: 3,000 concurrentusers (U.S. traditional bank with
more than 230 branches and 2 million accounts)—this same core has been tested up
to80millionaccounts,andsurroundproductshavebeentestedwithmorethan 10,000
concurrent users

SOLUTIONUSABILITY
• The Fiserv core platforms vary in usability. For example, while navigation within the
Precision platform is mostly driven by drop-down menus, DNA has a more modern
lookandfeel.DNAalsohassomeniceclientmanagementfeatures,suchasthe
ability to score clients and see statistics on their channel usage. It also offers a social media aspect
enabling live feeds and ease of creating and maintaining workflows.

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• UsabilityacrossFiservproductswillcontinuetoimproveasthevendormoves
toward a similar design language across products.Portico and DNAare the first
two cores toadopttheFiservDesignLanguageintheirprimary tellerinterfaces.

• More consumableAPIs and development toolswill enable banks and credit unions
to better meet the needs of their customers.

TOP PRODUCT DEVELOPME NT INITIATIVES COMPLETED OVER THE LAST

12 MONTHS
• DNA:Intelligent userexperience beta,enhanced commercial functionality forlarge
bank clients, and Notifi real-time alert integration

• Premier:Alertmanagement,real-timeperson-to-personpayments(Zelle),and
commercial loanmanagement

• Portico: Member experience, biometric authentication, and new mobile-first

account opening

• Precision: Alert management, real-time person-to-person payments (Zelle), and loan

renewal efficiency

• Signature: Alert management, real-time person-to-person payments (Zelle), and

multiplepromotionalratesonloans,eitherfixedorvariable,toattractnewloan customers

• Cleartouch: Alert management, real-time person-to-person payments (Zelle), and

deposit dormancy/escheatment efficiency management

TOPPRODUCTDEVELOPMENT INITIATIVESFORTHENEXT 1 2 MO NTHS

• DNA: Intelligent user experience, general availability, advanced commercial
capabilities, and mortgage service improvements

• Premier: Real-time transaction posting management, updated user-interface design

and user experience, and customizable loan notices/billing statements

• Portico: Fiserv Design Language new teller interface, real-time person-to-person

payments (Zelle), and Notifi real-time alert integration

• Precision: Real-time transaction posting management, updated user-interface

designanduserexperience,andcustomizableloannotices/billingstatements

• Signature: Default loan management (nonaccrual/charge off), enhanced

promotional rate management, strategic investments to support real-time
payment processing,customizedloannotices/billingstatements,andFiservdynamic
algorithm-based overdraft limit management

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APISTRATEGY
Fiserv’sESFwasbuilttoenableaSOAfoundationforAPIintegrationacrossFiservproductsas well
as third-partyofferings.

CLIENTFEEDBACK
BanksandcreditunionsmostoftenselectaFiservcoreforthevendor’smarketleadershipand
overallbreadthofproductportfolio.Thevendoralsoreceiveshighratingsfromitsclientsforthe
qualityofitsmanagementteamandvendorreputation.Unfortunately,beinglargealsohas some challenges. Its extremely
large client base, at times, makes it difficult to hear the voices of all of its clients and to effectively address all of
their needs. While clients appreciate the strength ofitsadvisorygroups, somefeelthat client support
anddeliveryofpromises areareasof
potential improvement for this vendor. Depending on the solution in place, feedback also
varies regarding the user interface and overall solution ease of use and navigation.

Some Fiserv clients mention challenges with integration of products outside of the core product
familyaswellaswithotherthird-partysolutions.Oneclientreferencestatesthatoneofthenew core
platforms could likely deliver integration faster with a better delivery strategy and resource
utilization.As mentioned in this profile, addressing integration and betterleveragingAPIs is a key
area of focus forthe vendor.Other areas in which clients mention they would like to see
enhanced functionality include online and in-app cardmanagement features, customer
self-serviceoptions, andthe ability to automatethe maintenance of valueson corporate
relationships for multiple accounts/signers. While all systems can be improved, Fiserv core
customers are, for the most part, satisfied with their offerings and decision to select Fiserv
for theircorepartner.Theyviewthesystemsastriedandtrue,andsufficientlyabletomeettheir core
processingneeds.

Table R: Key Strengths and Challenges—Fiserv

Strengths Challenges
Leader when measured by total number of core customers 18 core solutions

Breadthofproductportfolioandstrongbrand Some challenges with integration across products and with

recognition third parties, but a majorinitiative at the company is
addressing this

Proven track record Servicinganddeliveryonpromisescanbe improved

Source: Aite Group

JACK HENRY
JackHenry&Associates (Nasdaq: JKHY)wasfoundedin1976asaproviderof coreinformation
processingsolutions tocommunitybanks.Today,thevendor servesmorethan9,000 customers
across itsmorethan3,000products.Its threebrands—JackHenryBanking,Symitar,
and ProfitStars—support financial institutions of all sizes, diverse businesses outside the

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financialindustry,andothertechnologyproviders.ItsProfitStarsdivisioninparticular,which
offersseveralbest-of-breedstand-aloneproducts,continuestohelpthevendormovefurther and further
upmarket to attract larger financial institutions. Jack Henry generated approximately US$1.5 billion
in totalrevenue during the fiscal year ending June 30, 2018—a 7% increase from
the prior year.

Jack Henry offers four core banking offerings to banks and credit unions:

• SilverLake System provides highly customizable, enterprise-wide automation

designedfor growth-focused and commercially focused banks ranging from
community banks to multibillion-dollar, midtier institutions.

• CoreDirectorisaWindows-basedbankingplatformthatsupportsprogressive
community banks ranging from de novo banks to institutions with assets exceeding
US$2 billion.

• CIF 20/20 serves banks ranging from community banks to multibillion-dollar, midtier
institutions. It is a sophisticated, parameter-driven banking platform that provides
enterprise-wide automation.

• Episys is the company’s flagship credit union system. It is marketed to credit unions
with greater than US$50 million in assets.

AITEGROUP’STAKE
Jack Henry offers solid core banking capabilities to a loyal bank and credit union customer base.
While the vendor has traditionally been extremely strong among smaller financial institutions, in
recentyearsithasenjoyedgrowingsuccessmovingupmarket.Itisalsobenefittingfromthe
trend toward hosted/cloud solutions, and during its fiscal year ending June 30, 2018, its banking
divisionsuccessfullymigrated25bankcustomerstoahostedcoreprocessingsolution.This
environment is now selected by about 60% of its core customers. This shift provides its
customers with greater efficiency and speed to market while providing the vendor with a solid
base of recurringrevenue.

Jack Henry offers the market a broad portfolio of products and services that tightly integrate
withitscoresolutions.Infact,thevendorhasbuiltallitscapabilitiesasanextensionofitscore
forthehighestlevelsofintegration.Tightintegrationacrossitsproductsetisakeydriverfor many financial
institutionsselectingthis vendor.Inrecentmonths, JackHenryhasalso
aggressivelymadeacquisitions(i.e.,BoltsTechnologiesandAgiletics)andinvestmentsinareasin whichit
felt therewere gaps to furtherimproveits breadth ofofferings.Fraud and treasury services have
been areas ofrecent focus. The launch of its new treasury management solution
demonstratesitscommitmenttothatmarketandoffersitsclientsmorerobustcapabilitiesto
better compete against larger institutions in a critical area. The vendor also offers tools for easier
integration with external third-party providers. JXchange for banks andSymXchange for credit
unionsprovideastandardAPIforanythirdpartythatisinterestedinexchanginginformation
with its core systems or other complementary solutions.

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BASICFIRMANDPRODUCTIN FOR MA TION

• Headquarters: Monett,Missouri

• Founded: 1976

• Number of employees: Approximately 6,500

• Ownership and annual revenue: Between 11% and 15% of company revenue is
reinvested in research and development.

• Name ofprimary core banking solution: JackHenryoffersfour corebanking

offeringstobanksandfinancialinstitutions.TheyareSilverLakeSystem(banks),
Episys (creditunions),CoreDirector(banks),andCIF20/20(banks).

• Targetcustomerbase:Thevendorisstrongestamongsmallbanksandcreditunions but targets

all institutions. Its core solutions have seen growing success with larger banks and
credit unions, while itsProfitStars division furtherincreases its
penetration among larger institutions.

• NumberofU.S.-basedclients:Thereare1,736banksandcreditunionslivewithone
ofJackHenry’scorebankingofferings,sevenofwhichhaveoverUS$10billionin assets. The
core system client base can be broken down as follows:

• Large banks (greater than US$30 billion in assets): One

• Midsize banks (US$10 billion to US$30 billion in assets): Six

• Small banks (US$5 billion to US$10 billion in assets): 14

• Community banks (less than US$5 billion in assets): 1,020

• Credit unions: 695

• Numberofnewcoresystemclients:JackHenryaveragesabout25newbankand19
credit union core system client wins per year.

• 2015: 17 banks,20 creditunions

• 2016: 25 banks,17 creditunions

• 2017: 34 banks,20 creditunions

• First half of 2018: 15 banks and five credit unions

• Implementation options:All four of the Jack Henry core solutions profiled in

this reportcanbedeployedineitheralicensedorahostedenvironment,thoughthe
vendor is seeing a strong shift toward hosted deployments. It moves about 20 to
25 existing core clients from on premises/licensed to hosted each year.

• Thethreeproductsandservicesofferedbythecompanyseeingthegreatest
demand by banks: Enterprise payment solutions iPay Business Bill Pay,
and Banno (online/mobile banking)

• The three products and services offered by the company seeing the greatest
demandbycreditunions:Episys,Banno,andiPayBusinessBillPay
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• Average number of company products (in addition to core) used by core customers:
25

• Approximate size(total assets)oflargest corebankingcustomerdeployedinan

ASP/on-demand environment: US$10.4-billion-asset bank and a US$3-billion-asset credit
union

• Largestnumberofconcurrentusers itsmostscalablecore systemis supportingfor

abankinaliveimplementation:880,000customers(bankingplatform)and845,685 members (credit union
platform,SchoolsFirst Federal Credit Union)

SOLUTIONUSABILITY
• Episysoffersa great userexperience andtight integration acrossSymitar products.
Thesolutioniseasytonavigate,andseveralenhancementshaverecentlybeen made to improve its user
experience and flow across solutions within the Xperience
framework.ThisenablesaccesstoallapplicationsandJackHenryproductsthrough
asingleconsolidatedexperience.Assuch,ausercaneasilynavigateacrossmultiple products, including
reporting, marketing, core,AmazonAlexa, and online banking from a single location in a seamless
experience.

• System dashboards incorporate a great deal ofanalytics, enabling users to viewtheir

goals and peer comparisons to see howthey stack up.They can easily identify
areas orproductsthatarebelowtargetortheirpeersandworkwithmarketingtolauncha
campaign to improve sales. Marketing also gets insights into the buying
behaviors of membersinaneasy-to-readreport.Alloftheinformationmarketingneeds
fora successful campaign is grouped together so it can easily launch.

• SilverLake also offers easy navigation within the solution and a similar look and feel acrossall
integrated products.Dashboards,analytics, strong reporting capabilities, and high levels of
customization enhance the user experience.

TOP PRODUCT DEVELOPMENT INITIATIVES COMPLETED OVER THE LAST

12 MONTHS
• SilverLake System: JHA Treasury Management, DirectLine International, and JHA
Enterprise Risk MitigationSolutions

• Episys:IntegrationtoAlexa,integrationwithAppletablet/watch, andSymApp
(online loan and member application)

• Core Director:Annual release 2018 enhancements delivered, expanded OFAC

checkingcapabilities,andincreasedXperienceintegrationwithmultipleJackHenry
applications

• CIF 20/20: ExpandedPMI tracking and reporting, beneficial owner support, and
Xperience user interface

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TOPPRODUCTDEVELOPMENT INITIATIVESFORTHENEXT 1 2 MO NTHS

• SilverLake System: Multilevel lending enhancements for complex commercial
lending arrangements, expanded general ledger reconciliation options, and FAIM 4.0

• Episys: Mortgage secondary marketing, shadow accounting, and user-interface enhancements

• Core Director: Annual release 2019 enhancements, First Data/PSCU integration, and commercial
cash management Netteller integration

• CIF20/20:FirstData/PSCUintegration,FreddieMacinvestorreportingchanges,and
parameterized loan payment posting order

APISTRATEGY
JackHenryoffersitsclientsauniversalmiddlewarecalledjXchangeforbanksandSymXchange for credit unions,
which provides a standardAPI for any third party that is interested in
exchanging information with its core systems or other complementary solutions. It offers a SOA on a .NET
platform for open connectivity.

CLIENTFEEDBACK
One of Jack Henry’s key strengths is its people and the level of service it provides to clients. This
vendorconsistentlygetshighscoresfromclientsforitsclientsupport,itsreputation,andthe
transparency of its management team. Its clientsoften view it as a true partnerwith an accessible
management team that listens to their needs. High levels of satisfaction have led to high client retention rates
for Jack Henry.

OnecriticalgapthatAiteGrouphasnotedinJackHenry’soverallproductportfoliointhepast has been the lack of a

strongtreasury management solution.The vendor has recently addressed that with the rollout of a newsolution to
help its clients better competewith large banks and
moverfurtherupmarkettobettermeettheneedsoflargerbusinesses.Anotherareainwhich
clients would like to see the vendorimprove is an enhanced onboarding/account-opening
solution and advanced person-to-person payments and digital wallet.The vendor has already
addressedtheonboardingconcernwithitsacquisitionofBoltsTechnologies.Someclientshave also noted inthe past
thatwhile productswithinthe JackHenry product family are tightly
integrated,especiallywithitscoresolutions,integrationwithotherthird-partyofferingsand
evenProfitStarsproductscanbemorechallenging.Despitesomechallenges,mostJackHenry
clients,ifgiventhechancetodoitoveragain,wouldselectaJackHenry coresystem.

Table S: Key Strengths and Challenges—Jack Henry

Strengths Challenges
Highscoresfromclientsforsupportandservice Somechallengesintegratingwithnon-JackHenry
products, but this is being addressed with
jXchange

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Strengths Challenges
Transparentmanagementteamandhigh retention Clients would like to see more enhanced onboarding/
rates account opening capabilities as well asperson-to-
personpaymentsanddigitalwallets

Broad portfolio of highly integrated solutions

Source: Aite Group

VSOFT
Duluth, Georgia-based VSoft Corporation was established in 1996. It has primarily focused on
image-basedsolutions sinceits inceptionandservesover1,500financial institutions,transaction
providers,governments,utilities,telecommunicationcompanies,andretailorganizations
worldwide. The vendor announced its entrance into the core banking space in March 2010.

WingsisVSoft’sprimarycorebankingoffering,whichhasreplacedCoreSoft,VSoft’slegacycore
banking system.

AITEGROUP’STAKE
Wings is a platform-independent and open-system design built on leading-edge technology
to providehighlevelsofflexibilityandusability.Theplatformhasadeeplyintegratednatural
language processing engine and machine learning toolkit to understand the behavior of
financial institutions’employeesinadditiontoaccountholders.Thesystem’sparameterizedbackend
allowsfinancialinstitutionstoaddnewproductsandconfigurethesystemeasilyandquickly
withoutanycostlyprofessionalservicesneeded.InFebruary2016,CorporateAmericaCredit
Union deployed VSoft’s core for its member credit unions.

Wings is a customizable, parameterized solution that allows customers to not only tailor
the solutiontofittheirspecificbusinessrequirementsbuttoalsomakechangesandoffernew
products quickly and efficiently without needing VSoft staff to intervene. The core platform
was built from the ground up and was designed with open APIs.

BASICFIRMANDPRODUCTIN FOR MA TION

• Headquarters: Duluth,Georgia

• Launched: 2010

• Number of employees:1,682

• Ownership and annual revenue: Less than US$50 million

• Name of primary core banking solution: Wings (replacing CoreSoft)

• Target customer base: Community banks and credit unions

• Number of U.S.-based clients: Twofinancial institutions are live withVSoft’s new

core banking offering. No client has over US$10 billionin assets, and the core system client base can
be broken down as follows:

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• Large banks (greater than US$30 billion in assets): Zero

• Midsize banks (US$10 billion to US$30 billion in assets): Zero
• Small banks (US$5 billion to US$10 billion in assets): Zero
• Community banks (less than US$5 billion in assets): One
• Credit unions: One

• Number of new core system clients:

• 2015: Zero
• 2016: Zero
• 2017: Zero
• First half of 2018: N/A

• Implementationoptions:WingscanbedeployedineitheranASP/on-demandoran on-
premises/licensed environment. Its client base is a 50/50 split between the two.

• Thethreeproductsandservicesofferedby thecompanyseeingthegreatest
demand by banks: OnView Payments Manager suite, Arya Digital Banking, and Atlas
Payments Warehouse

• Thethreeproductsandservicesofferedbythecompanyseeingthegreatest
demand by credit unions: OnView Payments Manager suite, Arya Digital
Banking, and Atlas Payments Warehouse

• Average number of company products (in addition to core) used by core

customers: Two

• Approximate size (total assets)oflargestcorebanking customerdeployed inan ASP/on-demand

environment: US$2.5 billion

• Largestnumberofconcurrentusersitsmostscalablecoresystemissupportingfor
a bank in a live implementation: Not provided

TOP PRODUCT DEVELOPMENT INITIATIVES COMPLETED OVER THE LAST

12 MONTHS
• Natural language processing and machine learning engine

• User experienceenhancements

• Open API architecture

TOPPRODUCTDEVELOPMENT INITIATIVESFORTHENEXT 1 2 MO NTHS

• Reporting and business intelligence enhancements

• Integrations

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APISTRATEGY
While the Wings core banking platform is based on an open architecture and was built to enable
an SOA foundation for API integration, the company has not yet rolled out an API marketplace.

CLIENTFEEDBACK
One of VSoft’s key strengths is the level of service and support it provides to its clients. This
vendor consistently gets high scores from clients forits service and support, and the accessibility
of its management team. Clients also mention the vendor’s willingness to listen and to
collaborate with customers, resulting in high customer satisfaction.

Clientsalsomentionthattheywouldliketoseethevendorimproveoverallinthespeedof development of new products

and services.

Table T: Key Strengths and Challenges—VSoft

Strengths Challenges
Noweightofanylegacyproduct,allowingfora modern Needs larger install base to prove scalability of its solution
architecture

Needstostrengthenoverallcompanyawareness and brand

Source: Aite Group

EMERGING VENDORS
Despite high barriers to entry, the market has seen the entrance of several new U.S.-based
vendorsoverthelastfewyears.CorelationInc.,Finxact, andNymbushavedevelopednewcore
processingplatformsfromthegroundupwithnoweightofanylegacyproduct,allowingfora modern
architecture, and they position their solutions as a new kind of core system.

CORELATIONINC.
San Diego-based Corelation Inc. was established inAugust 2009 with the goal of“setting a new
standardforcreditunionsoftware.”Whileitisafairlynewplayer,its foundingteammembers are known
within the industry and have proven track records for success. This places Corelation at an
advantage over more traditional startups and has enabled the company to quickly sign new credit
union customers to its KeyStone core banking product. Aite Group estimates that
approximately60creditunionsarelivewiththesolution.Seventeencreditunionsconvertedto KeyStone
in 2017, and the firm signed the US$5 billion-assetPennsylvaniaStateEmployees
Credit Union and US$2.4-billion-asset Sandia Laboratory Federal Credit Union. Some of the
KeyStone core credit union clients also include US$3.8-billion-asset Desert Schools Federal
Credit Union, US$816-million-asset USE Credit Union, US$722-million-asset Pacific Marine Credit
Union, US$478-million-asset Capital Educators Federal Credit Union, and US$469-million-asset People First
Federal Credit Union.

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FINXACT
Foundedin2016,Jacksonville,Florida-basedtechnologyproviderFinxactisthenewestplayeron
theblock.TheFinxactsystemisbeingbuiltforAWS,althoughitcouldsupportotheroptions.Itis
meanttobereal-timeandevent-driven.Thedesigniscenteredoninventory,meaningany
attribute—whether a traditional currency, an electronic currency, a security, a physical asset,
etc.—rather than the customer account. In terms of openness, Finxact was the first banking
systemsuppliertosignupfortheLinuxOpenAPIInitiative,whichseekstodefineavendor-
neutraldescriptionformatforAPIs.FinxactisusingtheGoogle-derivedopen-sourceGolang
high-performancelanguageandSQLalternativedatabases,withnon-SQLoptionstofollow.The
architecture is being described as “container-based,” so the system can be implemented on the
cloud and also on any machine, and is deployable in-house.

NY MB US
FoundedinFebruary2015,Miami-basedtechnologyproviderNymbusalsotakesamodern approach
to core processing with software that fuses core functionality, a suite of applications, and cloud-
based infrastructure into a single solution. Developed with a strong emphasis on user
experienceandusability,theSmartCoresoftwarefeaturesasinglesign-ontoacentralhub,
completewithacustomizabledashboard, semantic searching,reportingtools,anda360-degree
viewof every customer.The company has continued to grow rapidly by expanding its
capabilities, geographic footprint, and client base. In 2016, Nymbus also acquired competitor
R.C.Olmstead, with its 46 core banking credit union clients, as well as credit union service
provider KMR.

REGIONAL VENDORS
Formostofthesevendors,thesoftwareissoldtosmallbanksandcreditunionsandisofferedin a service-
bureau environment, giving institutions that want larger data-processing services the
opportunitytooutsourcewithoutgoingthroughtheexpenseofbringingcomputersin-house and hiring
staff.Some of these players, such as Synergent, partner with the core vendors or offer a
customized version of their system.

CREDITUNIONSERVICEORGANIZATIONS(CUSOS)
Many U.S. CUSOs allow a credit union to conduct business it would otherwise be restricted from
duetoregulatoryconstraints.MostCUSOsarelimitedliabilitycompanies,whichprovidesa
measureofprotectiontothecreditunionfromtheactionsofitsCUSO;further,manyprovide
technologyservices,includingcoreprocessing.ExamplesincludetheNavyFederalFinancial
Group, Primary Financial, CU-NorthWest, and CU Source.

COCC

Southington, Connecticut-based COCC was founded in 1967 and has approximately 425
employees. It is a client-owned company with an independent board of directors comprising
institution CEOs nominated and elected from within the vendor’s client base. It was organized as
acooperativewithamissionofbeingaclient-centricserviceorganizationwithalaserfocuson quality
servicedeliveryoverprofitandshareholdergain.Insightis thevendor’sonly core

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banking system and serves both banks and credit unions from a single platform. It is a modern
.NET solution built on an advanced Oracle database and Windows technology. Insight is a
derivative of the Fiserv DNA platform and is only available in a hosted deployment environment.

COCC clients have the option of selecting a fully hosted out-of-the-box solution that is
tightly integratedwithabroadsuiteofbankingproductswithaffordablepricepointsforallsizesof
institutions. Insight’s open architecture enables ancillary products to fully integrate with the
productsCOCClicenses,integrateswith,andsupports.ThisenablesCOCCtoofferitsproducts
while also giving financial institution clients that prefer a more customized experience the option
tochoosetheproductstheywanttointegratewiththeInsightcoresystem.Thesolutionhasa
centralized customer information file and rationalized database for a 360-degree view of
customers.COCC’spartnershipstructurealsoappealstoinstitutionslookingforacooperative environment.

WITH - ANSWERS
GrandRapids,Michigan-basedCU-AnswerswasfirststartedasWestMichiganComputerCo-Op
Inc. (WESCO) in 1970 and changed its name to CU-Answers in 2003. CU-Answers is a CUSO
and a cooperative. From data processing and computer network support to image check
processing andcustomizedmarketingcampaigns,CU-Answersservesmorethan175creditunions
nationally. CU-Base Gold, the company’s core processing software, operates using the IBM
iSeries hardware platform.The company also offersa wide range of complementary solutions,
includingCU-BaseServicerEdition,asolutionspecificallydesignedforCUSOs,andCU-Base
OperatorEdition, geared forthe data center community. CU-Answers announced that it recently completed
conversions forthe US$174-million-asset Monroe County Community Credit Union and the US$149-million-asset
Chief Financial Credit Union.

EPL
Birmingham,Alabama-basedCUSOEPLhasbeenofferingits coreproduct, i-Power,toits credit union member base
since1977. Its shareholderowners include DedagroupNA(majority investor and NorthAmerican subsidiary of
Dedagroup ICT Network, an Italian software and IT services
company),AlabamaOneCreditUnion,Georgia’sOwnCreditUnion,LegacyCommunityFederal
CreditUnion,AventaCreditUnion,AlabamaTeachersCreditUnion,WinSouthCreditUnion,
PeachStateFederalCreditUnion,andLeagueofSoutheasternCreditUnions.EPL’sclientlistof 130 credit unions ranges
from small, one-branch credit unions to those with more than US$1.7 billion in assets.

SYNERGENT

Westbrook,Maine-basedCUSOSynergenthaspartneredwithJackHenry&Associatestobring
theSymitarEpisyscoreprocessingplatformtosmallcreditunionsintheNortheast,mainlyin NewEngland
andNewYork.Inadditionto payment services, check processing, card services,
andmarketingservices,Synergenthasbeendeliveringcoreprocessingservicestocreditunions since 1971. Synergent
offers its core processing service to 66 credit unions.

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INTERNATIONAL VENDORS WITH U. S. PRESENCE

In addition to U.S.-based vendors, several global/international core vendors are fighting for a share of the U.S.
market.Some of these vendors havehad a great deal of successwinning the core business of banks around the
globe, but their success in the United States has, thus far,
been limited. While U.S. financial institutions have been willing to partner with these vendors on
theITservicessideandwithsomepoint solutions,thenumberofnon-U.S. coresystems
deployed by U.S. banks remains low.There have been a fewhigh-profile examples of institutions taking a chance
with these solutions, but there have also been some high-profile failures. Such failed partnerships have created
an even more challenging environment forthese vendors in the United States, but smaller victories with other
products and the size of the U.S. market continue to motivate these vendors to pursue and invest in the United
States.

On a positive note, Aite Group analysts observe that some of these vendors’ brands are
continuing to strengthen, promising future success forthoseable toconvinceU.S. bank decision-
makersthattheynotonlyunderstandU.S.regulationsandcustomerneedsbutthattheyalso offer compliant solutions.
Table U lists some of the leading global core vendors targeting the U.S. market.

Table U: Leading Global Core Vendors With U.S. Presence

Vendor Core solution(s)
Accenture Alnova Financial Solutions

EdgeVerve Finacle Core Banking Solution

Intellect Design Arena Intellect Digital Core, Intellect Quantum Core

Oracle Oracle FlexCube, Oracle Online Banking Platform

SAP SAP Transactional Banking

Tata Consultancy Services TCS BaNCS

Temenos Group SA T24, Temenos Core Banking

Source: Aite Group

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CONCLUSION
Asagrowingnumberoffinancialinstitutionslooktore-evaluatetheircorebankingstrategyto determine whether their
solutions have progressed with the rapidly changing environment, Aite
Group recommends the following for financial institutions and vendors:

Financial institutions:

• Align your bank’s ITtransformationwithnew paradigms.These includetechnological agility, time to market,

digital imperatives, and customer-centricity.

• Determine the infrastructure deployment model that best suits your business objectives.This includes
theuseofhosted,SaaS,or clouddeployments.Matchyour security and data requirements with the
characteristics of each deployment model.

• When selecting a new vendor partner, don’t just consider functionality and intuitive
workflows.Vendorsshouldalsodemonstrateknowledgeofkeymarkettrends,a
clearly thought-out and communicated roadmap, and a culture that aligns with that of the
financialinstitution.

• Leverage standards. Financial institutions should look for a solution that can offer them an open
architecture based on interoperability standards and APIs that can facilitate both front-end and
back-end integration.

Vendors:

• For the more established vendors, while functionality is important, user experience
iscriticaltofinancialinstitutionsandthusshouldrepresentthegreatestshareof new enhancements.

• Adopt agile development methodologies and strive for smaller, more frequent
releasesandservicepacks,asopposedtolarger,less-frequentreleasesonceor
twice a year, especially when it comes to enhancements of the user experience.

• Continue to build value into your core platforms. Pricing pressures from all
institutions will further increase, and building value by constantly introducing new functionality will
be critical to your success.

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RELATED AITE GROUP RESEARCH

Top 10 Trends in Retail Banking & Payments, 2019: Disruption Is the Norm, January 2019.

Top 10 Trends in Wholesale Banking & Payments, 2019: Accelerate and Integrate, January 2019.

Large Banks and Technology Buying: An Evolving Mindset, July 2017.

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ABOUT AITE GROUP

AiteGroup isa globalresearchand advisory firm deliveringcomprehensive,actionable adviceon
business, technology, and regulatory issues and their impact on the financial services industry.
With expertise in banking, payments, insurance, wealth management, and the capital markets,
weguidefinancialinstitutions,technologyproviders,andconsultingfirmsworldwide.We partner with our clients,
revealing their blind spots and delivering insights to make their businesses
smarterandstronger.VisitusonthewebandconnectwithusonTwitterand
LinkedIn.

AUTHOR INFORMATION
Christine Barry
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[email protected]

David Albertazzi
+1.617.398.5036
[email protected]

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