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Insights from the The Federal Deposit Insurance Corp. reported that as
of March 16, 2017, there were 6,122 U.S. banks. About 90
2017 Jack Henry percent are classified as community banks, which typically
hold less than $1 billion in assets (for a bank, an asset is a
loan).
Annual Conference Advantages of working with community banks

If you are selling merchant services in your community, get
to know the community banks that your merchants and
prospects use. A deposit in a small bank will create a local
loan, but in a megabank, it will fund loans countrywide,
as well as buy foreign currencies or bonds, corporate stock
or bonds, and other securities. Large banks are involved
in trading securities, investment banking, insurance sales,
and credit card issuing and acquiring. A big bank makes
non-interest income from trading securities, fee based
services, overdraft fees, etc. A local bank makes most of its
income from local loans made to local merchants that you
want as your clients.

In the credit card world, bank issuers and bank acquirers
used to be differentiated. A bank was one or the other; some
nonbanks were large acquirers. Today, fewer than 10 banks
are the major issuers and acquirers, and most of them are
both. Examples include Citigroup, Bank of America, Wells
By Brandes Elitch Fargo, JPMorgan Chase, Capital One and U.S. Bank. These
CrossCheck Inc. banks will typically sponsor large processors and ISOs,
which might have sub-ISOs and payfacs under them.
or the last seven years, I've reported on the
annual ProfitStars Educational Conference. Jack If you are a merchant level salesperson or small ISO, it
Henry & Associates Inc. is the parent com- is unlikely you will have a senior level contact at one of
F pany for ProfitStars, which handles payments. the big banks, but if you work with your local community
Previously, the companies held separate conferences; this bank, you will soon get to know the loan officers and even
year, they were combined as the 2017 Jack Henry Annual the CEO, who will at some point refer clients to you for
Conference. This resulted in a comprehensive, four-day help that you can provide but the bank cannot because it
presentation on current issues in commercial banking and does not have an in-house treasury services or merchant
payments for 1,800 attendees at the Gaylord Nashville con- services department. These local banks are likely to be
vention facility. Jack Henry clients. Reach out to your local banks for joint
marketing campaigns.
Jack Henry is an S&P 400 company with fiscal 2016
operating revenue of $1.355 billion. In the KPMG 2016 Ways in which banks are adapting
Fintech 100 listing, it is ranked as the 14th largest provider You have heard nonsense in the press about the state of
of IT financial services worldwide. It supports over 11,000 banking today. Bill Gates said, "Banking is necessary;
financial institutions by providing either core processing or banks are not" and "Banks are dinosaurs." But, as others
a suite of products and services. Clients range from small have said, if cars performed like Microsoft software, your
community banks to the largest banks owned by financial car would crash twice a day for no reason, and every time
holding companies. you got a new car you would have to learn to drive all over
again because it would operate differently than the old one.
A core service provider offers a back-end system that can So Gates is not a credible witness on this subject.
process daily banking transactions and post updates to
accounts and other financial records. Core systems usually Here is a more nuanced comment going around: Banking
include deposits, savings accounts, investments, loans, as we know it is over. Technology change (smartphones,
credit-processing capabilities and more. Since these are big data and the cloud) allows anyone to create a fintech
usually in silos, they provide reporting tools and interfaces startup, distribute services directly to consumers, or create
to the general ledger. Changing your core processor a platform for consumers to provide those services to each
is daunting and takes at least a couple of years. It is not other and offer a richer customer experience.
undertaken lightly. Jack Henry has a mere handful of
competitors, and it would be difficult to start a business as Yes, things are changing in and around banking. Yes, banks
complex as this from scratch today. have a customer base that trusts them, brand recognition,

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