For all of FinTech’s promise for healthy disruption, Trent Fleming also sees the very real potential for unhealthy distraction. That’s especially true when it comes to stripping away the core systems banks have used for decades to process data and handle accounting needs.
Let’s be clear: Fleming is as far from a Luddite as you can get. A respected financial institution advisor and consultant with 30 years’ experience, he was a pioneer in bringing check imaging technology to community banks. But the legacy systems he defends—those at the heart of core banking operations—date to the era of green screens, pancake-sized floppy discs, and cell phones the girth of dachshunds.
“The solid systems from Fiserv, Jack Henry & Associates and FIS have roots into the late ’80s, which is older than you might think,” Fleming says. He points to the SilverLake System, which is touted on Jack Henry’s website as “a competitively distinct, extremely powerful banking platform.” What you might not know is that the moniker and the system have direct connections to IBM’s earliest computer technology for banking.
Here, Fleming offers his views on how banks can avoid the mistakes that come with adopting new technology for technology’s sake, and how to integrate old-school core with a brave new world of touchscreens, bank apps and big data.
BAI: With all the talk of FinTech this and FinTech that, is there really such a thing as banks getting too absorbed in today’s technology?
Trent Fleming: I see so much distracting my clients along the FinTech lines. The reality is that when it comes to the basic things we need in terms of customer data and transaction posting, the current systems in place are capable of executing on a very high level. The surviving core vendors have proven themselves over time to be reliable partners, have invested heavily in infrastructure and staffing to support their bank customers, and yes, continue to invest in research and development to bring out new products and services.
BAI: So you see FinTech as more of an evolution as opposed to a revolution?
Fleming: FinTech was what we used to call third-party systems. The first check imaging system was developed out of a garage and we have a history of this kind of innovation in banking. Some of these FinTech providers are compelling in what they can do. But it’s not a new thing: It’s a way of enhancing the basic core operating system and not really replacing it. I say before we rip out the guts out of a core system and start over, let’s see what we already have and how it might work better for us.
BAI: How does that contrast with recent stabs at creating next-generation core systems?
Fleming: There are a handful of companies tagging along with the FinTech wave of technology innovation and generally, their sales pitch involves explaining why your current legacy core system is not right for the future, and encourages you to change. But we’ve seen so many situations where some of the latest efforts are spectacular failures. One company came out with what they purported to be a new system but they executed poorly and were sued out of business because larger companies were interested in protecting their intellectual property.
BAI: So where do you see the balance between new technology and the old?
Fleming: So much of the innovation, as it should be, is on the customer-facing side: in Internet and mobile. And we still need to process transactions, record and post them accurately and report them in a timely fashion. Those three things haven’t changed. But customers have changed, and become savvier. We’ve gone from a customer getting a statement in the mail that they don’t open at all, to seeing that activity on the screen via Internet banking, and now we’ve added personal finance management to help them do a better job of managing their money. We’ve gone from the paper statement with the delays inherit in that, to an Internet screen that’s more timely, to a mobile screen where you see all their info in real time.
BAI: Do you see anything on the customer side that particularly excites you?
Fleming: PNC, a very innovative bank, began advertising a Power Bar as part of their Virtual Wallet mobile banking app. You open it up and bar graph pops up; you can use your finger to touch the bars and transfer from one account to another. The end result is no different than typing a number on your keyboard, but typing doesn’t have the sexiness of manipulating a bar graph. Steve Jobs said that consumers want experiences with computers that they can touch, and the Power Bar appeals to that: simply, delivering a better customer experience.
BAI: But at the day, is old school sometimes the best school?
Fleming: I rent from Avis quite a lot and they still have dot-matrix, pin-feed printers. They tear the statement off the printer, and the pin feeds off the side of the page. They don’t make these printers anymore, and I said to the lady at the counter, “What do you do if they break?” She responded, “The company bought so many of these when they first came out, we have four spares in the back.” Avis’ focus appears to be electronic receipt delivery, so instead of investing in new printing technology, they are working to change customer behavior.
My parting shot to the banks is this: I’d rather be focused on the service side for the customer than to completely migrate a core system, take 24 months to do it—and basically wind up where you started.
Trent Fleming serves as an advisor to executives on matters of technology, strategy, and management. He may be reached via [email protected].