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Jack Henry-ProfitStars 2018 conference:

Learning from community banks

followed. These rules are codified in banking law and
regulation, making banking a highly regulated industry.

Community banks (usually defined as those with less than
$1 billion in assets, the overwhelming majority of banks)
must follow the same rules as money center banks 100 times
their size. However, small banks don't have the resources
to run their own data centers or develop software to make
and service loans, open new accounts, and process cash
deposits and withdrawals.

This is what core processors do: run data centers, either
indirectly by providing the software, or directly when
operations are outsourced to them, and the bank no longer
runs its own IT department internally. This goes for other
aspects, too, such as running and supporting call centers,
websites, mobile products or ATMs. With Jack Henry as a
partner, small banks can compete with much larger banks
By Brandes Elitch in terms of technology and avoid the expense of staffing
CrossCheck Inc. and managing an IT department.

or the last eight years I've attended the annual Megabank profitability
ProfitStars payment conference, and I've shared As an entrepreneur or small business owner, would you
with our readers what's happening in the world want to work with a very large bank? Fewer than a dozen
F of banking and payments. It's critical for ISOs megabanks are both the biggest card issuers in addition
and payment processors to understand this environment, to being acquirers. The income statement of a megabank
because if you don't have a bank partner processing your looks very different from that of a community bank. Taking
transactions that truly understands your business, particu- one of the five largest banks in the country as an example,
larly if you are a third-party processor, you don't have a which shall remain nameless, here is the breakdown of
business – period. This article explores current trends in current profitability:
banking and payment processing from the ISO's perspec-
tive. • About 37 percent of their profit comes from consumer
banking (retail checking, consumer credit cards and
Jack Henry is a large ($1.5 billion annual revenue) publicly residential mortgages).
traded company. It is one of three "core processors" for the
American banking industry. Its clients are commercial • About 18 percent comes from global wealth
banks, credit unions, savings and loan organizations and management and investment management
corporations. (brokerage, asset management, and securities based
businesses).
This is a big constituency: there are about 4,800 commercial
banks, and over 5,000 credit unions, and Jack Henry has a • About 5 percent comes from global markets (fixed
20 percent market share. The company is well managed, income and derivatives trading).
as evidenced from its share price. This year's conference
attracted 1,700 attendees with a comprehensive offering Where does the local business fit in? About 40 percent
of seminars, training and lectures over the course of four of profits comes from "global banking," which includes
days. investment banking, advisory services, and, here we are,
commercial and business lending.
Banks are different from other businesses. They have a
fiduciary responsibility to safeguard their clients' deposits, Lending to small business and providing payment services
and a duty to understand their borrowers' businesses is not a priority for megabanks, but it is for community
and continue to provide funding when certain rules are banks. When I worked for a megabank, the senior lenders

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