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Insights aplenty (versus 5 percent spent by its competitors). The company is
dedicated to and focused on being the best core provider.
at 2019 JAC Fundamentally, the core's primary mission is to enable the

bank to compete in the marketplace with larger players,
By Brandes Elitch not just the seven big banks, which have 55 percent of the
demand deposit accounts in the country. Competitors are
CrossCheck Inc. not just other banks; they're fintechs, too, and Jack Henry
must pick the right partners to provide new services and
mportant payments industry deals have dominated solutions – a critical task.
fintech M&A activity recently. In July, Fidelity
National Information Services Inc. (FIS), a bank core Why do community banks matter?
I processor, paid $42.9 billion for bankcard proces-
sor Worldpay Inc. Also in July, Fiserv Inc., another core Community banks see the need for transformation as an
processor, acquired First Data Corp. for $22 billion. In existential question. They hear industry pundits make
September, Global Payments Inc. bought Total System comments such as, "Eighty percent of banks will not exist
Services Inc. for $26.1 billion. in 10 years," which is obviously a nonsensical comment,
but one that should be taken seriously nonetheless, as
ISOs frequently ask why a bank core processor would buy smaller banks see what is going on at fintechs, PayPal
a credit card acquirer/processor and how this could impact and Square, for example, and big tech companies such as
them down the road. Will these acquisitions threaten the Apple and Amazon.
traditional small and midsize business (SMB) market ISOs
target? Will it empower community banks to sell card Beyond traditional relationship with consumers and
processing directly to their SMB clients and cut ISOs out? SMBs, banks today need to address four other domains:
business-to-business, person-to-person, bill payment and
Some ISOs have said they see these moves as a life-or-death POS functions, including contactless, rewards, mobile
matter if they enable community banks to control the entire wallets, and the Internet of Things. There is also the
SMB business ecosystem and shut out the ISO channel. To digital cash management domain, which includes faster
address these concerns, it's essential to understand the payroll needs.
business of bank core processing. I just returned from the
Jack Henry Annual Conference (JAC) & TechConnect. Jack Consumers are loyal to their local banks first and foremost,
Henry is the other major core processor in this country, ahead of the neobanks (with no banking license, such as
and I'll share what I learned at the conference. Chime and Moven), challenger banks with a banking
license (for example, Revolut and Monzo), direct banks,
What is a bank core processor? open banking (instant payments, mobile payments, virtual
currency), and fintechs.
A bank core processor provides the entire general ledger
and operating system for a financial institution (FI). The good news is that community banks can thrive.
This includes processing solutions, business automation Consumers and SMBs are looking for quality products and
processes and information management. It is truly an FI's services, time saving, simplification, a sense of belonging,
backbone. In 1980, there were 37,000 commercial banks in and reduced anxiety about banking and payments.
the country; currently, there are approximately 4,605. Jack Local banks can be more relevant than Amazon, because
Henry supports about 1,030 of them. Total banking assets consumers trust their local banks above all the competitors.
were $1.5 trillion in 1980 and are $18 trillion today. It would A local bank can be the hub of a customer's financial life,
now be virtually impossible to create and build a new core not just one aspect. Even the physical experience of going
processor, so the big three are a kind of oligopoly. to the branch is important.

Because Jack Henry provides the infrastructure and
Keep in mind that Jack Henry has over 300 products, the products, it can radically lower a bank's operating
employs more than 6,500 people and serves 9,000 clients expenses, particularly if delivered in the cloud, which
(including 7,000 customers outside of the core base). It frees a bank from having to maintain its own data center
supports five separate core processing systems. Over the or call center. One essential metric for measuring a bank's
last 15 years, Jack Henry has completed 23 acquisitions in performance is the efficiency ratio, and using Jack Henry
its payment processing subsidiary, ProfitStars, and over can provide the tools to manage this to a successful target.
27 other acquisitions. JAC has a market capitalization in
the range of $11 billion and has annual revenue of around The goal is to increase revenue for the bank, lower costs
$1.55 billion. and expenses, and automate back-end processes. Jack
Henry can choose best-in-class partners that provide
At heart, you could say that Jack Henry is a technology an API that can be quickly curated and integrated and
company. It spends 14 percent of its revenue on R&D offered to a bank's clients. API plug-and-play code and

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