19 Jan - Core Banking Changes

The below article is from the January 2017 edition of IBS Journal https://ibsintelligence.com written by Scott Thompson.

2016 saw a number of new players enter the core banking systems fray, looking to disrupt incumbents and tap into a hugely lucrative market. One of the highest profile was US-based Nymbus, which now has over 45 customers, acquired from recent acquisitions, that are in the process of converting to its SmartCore core banking platform, with three on track to go live in Q1 2017.

In addition, CHROME Federal Credit Union is also rolling out SmartCore,replacing a Jack Henry Symitar system. The solution is offered on a fully hosted basis, with the vendor aiming to take on the well- entrenched, traditional players in the US market, such as FIS, Fiserv, Jack Henry and D+H.

The roots of the offering stem from a sister company, Mediaspectrum, which specialises in the publishing domain and provides content management system (CMS) platforms to media moguls in the US and internationally. USA Today is among its customers. Nymbus’ co-founders are Alexander Lopatine and Scott Killoh, a co-developer and founder of the Openpages CMS (Openpages is now owned by IBM). Killoh is also chairman of Mediaspectrum.

David Mitchell joined the FinTech from Open Solutions, where he served as President and Chief Product Officer of various divisions over a 12-year period, helping it grow to provide cloud-based technologies to approximately 3,600 clients around the world. The company was acquired by Fiserv so it could provide its legacy customers a migration path to a more modern solution at the time.

“Unfortunately, that system is already 20 years old and my passion to help community banks and credit unions is why I joined Nymbus,” says Mitchell. “The leaders of community banks and credit unions must recognise that we are experiencing significant changes in the way financial services are consumed.

The customer expectation is not the community bank down the block, the customer expectation is Amazon. Now is the time to drive innovation, lower costs and allow community- based financial institutions to continue to be the pillars of our communities. Technology to compete is the only path.”

All of which sounds great, but the world is not exactly short of FinTechs claiming they will shake up the banking sector. The crunch question: what has been the reaction from US banks and credit unions thus far? Is it fair to say SmartCore is not suitable for everyone? The vendor, for instance, initially pitched to larger FIs, but found that their sales cycles and decision-making processes were too long. So it changed tack and is now targeting community banks and credit unions that have less than $10 billion in assets as their primary market. There are more than 12,500 such FIs in the US alone, Mitchell notes.

“The core banking market currently has a huge pent up demand for cloud-based enabling technology,” he adds. “Core banking changes over the last 10 years have been flat and usually viewed as a high-cost, high-risk undertaking.

In addition, moving from an old legacy platform to another legacy platform is not a viable option for community banks and credit unions.

FIs have basically been held hostage by the current industry vendors with no agility to address the digital consumption of financial services that consumers demand and no ability to reduce the high cost of their current technology. All of these factors are now driving more FIs to build a business case for a technology change. Because of these market dynamics, Nymbus has been viewed as the most modern technology supplier who is at the forefront of innovation to help community-based FIs survive and thrive.”

Challenger banks

Last year, new entrant OakNorth became the first bank in the UK to have its core system fully hosted on the cloud (see pages 24-26 for more info on this). Is, therefore, the US challenger bank/new entrant market key for Nymbus? “We feel we have the only disruptive platform approach for challenger banks. We leverage
a powerful, scalable enterprise cloud platform – the result of more than $200 million in invested capital
and over 10 years of development.

Our solutions are purposely built to transform the way traditional FIs support and interact with their customers,” Mitchell states. “Our competitors in this sector of course have scale and size, but with that also comes complexity and high costs.

The scale they have are thousands of financial institutions on unwieldy legacy IT systems that can address compliance issues, regulatory changes or the digitalisation of the consumer. Over the last few years, challenger banks have actually outperformed the Big Five banks on cost reductions, better rates, and of course world class personalisation and digital technology services.”

In 2016, Nymbus completed a $12 million financing round led by the major shareholders of Vensure Enterprises. It also acquired fellow supplier R. C. Olmstead (RCO), giving it a presence in the midwest credit union market. RCO came with 46 customers, all in the low-tier segment.

So what can we expect from this fast moving startup in 2017? “We will continue to invest to accelerate our vision of delivering innovative technology and supplying relevant guidance and superior support to our customers,” says Mitchell. “In addition, because of our rapid growth and the addition of new very innovative clients like CHROME Credit Union, we are very focused on a world class conversion experience for our customers moving off their legacy systems.”

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