Chasing the US core banking market

After many years of talking about the need for core banking system replacement among US banks, it seems that foreign and domestic vendors are finally making some headway. But if the predicted boom in replacement projects emerges, where will the banks and vendors find the required technical and business staff to do the work?

i-Flex has been targeting the US market for several years - even more so since the Oracle acquisition - and late last year finally got a significant retail bank core system replacement deal with People's Bank. It also set up a hosted ASP offering for its Flexcube offering aimed at community banks.

Temenos last month announced a distribution deal with US vendor Metavante, and together they reckon they have the right product (TCB) for the largest retail banks, at the right time -- a time when business limitations caused by legacy systems are getting severe enough for banks to contemplate replacement. 

Backing up this view, analyst firm Aite Group estimates that 17 percent of US banks are in an urgent situation, with legacy core banking systems that are holding back business progress. And it says five percent of banks will actually undertake a core banking replacement process as a result.

Michael Hayford, COO at Metavante, thinks that number is a little bit high, but could be reached if a lot of the smaller banks approach vendors for turnkey systems migration. Among the top 150 large banks that Metavante and Temenos are targeting, he admits that if 20 banks came to the market at the same time, the industry would be overwhelmed.

Misys head of core banking, Guy Warren, is more cynical. In this recent interview he claims it's the analysts calling for urgent core banking system replacement rather than the US banks themselves, who are still worried about risky 'heart and lung transplants'. But he says further consolidation will possibly be a driver for change.

There are some things they all agree on, though. One is pushing a modular, phased approach to core system replacement to assuage fears that replacement projects are too big, expensive and prone to failure.

They also agree that for the past decade, there have been extremely few replacement/migration deals in the US, as organisations have made do with legacy core systems.

Logically, this would lead one to expect that there are very few people in the US with experience on modern core banking replacement projects. If the vendors and analysts prove correct about an imminent boom in RFPs and replacement/migration projects in the US, you can probably expect to see a corresponding boom in US visa applications as they look to ship in foreign technical and business process expertise to help drive their projects.