A massive technology overhaul by American Savings Bank in Honolulu is evidence that the buying spree many core systems vendors went on in recent years to bulk up their product suites is paying off.
The $4.9 billion-asset subsidiary of the utility company Hawaiian Electric Industries Inc. made the gutsy move to swap out about 30 software programs, including its core processing system, for new technology. In doing so, it went from working with more than six vendors to just one, Fiserv Inc. The thrift's decision was as much driven by a need to improve clunky operations as it was by a desire to save money.
"If you can find a vendor that can offer a solution for just about everything you would need to run your business, the chances you would have for total integration is greater," says Rick Robel, American Savings Bank's executive vice president of operations and technology.
Previously, employees had to enter new customer data in four or five separate programs to ensure information was consistent across the bank. It also was difficult for the thrift's employees to get a complete view of a customer's product relationship with the bank without bringing up multiple work screens. "Because the systems were so disparate, if you wanted to do any data entry ... you had to have all those applications up," Robel says. "We eliminated a lot of that with Fiserv."
The deal also was a major coup for Fiserv, and in many ways vindication that the slew of acquisitions it completed in 2007 and 2008, including its $4.4 billion purchase of the electronic bill-payment and online banking software maker CheckFree Corp., is helping win new business.
"It really builds on the Fiserv 2.0 strategy that we delivered back in 2006, which was to bring our products together to provide larger bundles of value for the clients," Jeffery Yabuki, Fiserv's president and chief executive, said. The catalyst that prompted American Savings Bank's management to consider upgrading its technology was the impending contract renewal for the core system it was using at the time from Metavante Technologies Inc. [Metavante is now owned by FIS.]
Although the contract was not due for another two and a half years, Robel knew simply deciding whether to convert to a new system would be difficult. "You never want to go through a switch like this," he said. "It's not an easy activity to do. It doesn't stop progress but it does require a lot of focus, which does limit your capabilities to do other things."
American Savings Bank started the evaluation process in January 2008 to determine whether it should switch vendors. At the end of the year the company decided it should move its core system along with its cash management, Internet banking, branch capture, lending and numerous other programs to Fiserv.
Because the project affected virtually every part of the 57-branch institution, Robel knew communication would be crucial. He organized employees into teams with responsibility over the thrift's different operating areas and put them in charge of making sure the conversions affecting their areas stayed on track. Every Monday all stakeholders involved in the project met from 8 a.m. to 2 p.m. to go over progress on each conversion, he said. "It was grueling, it was excruciating, it was painful, it was intensive and you were not excused from attending," Robel said.
The implementation process, which took 14 months and was mostly completed in May of this year, occurred without any major missteps. However, Robel said he underestimated the level of human resources needed to complete the project. He brought on contractors to help manage the upgrades.
Robel and Yabuki declined to discuss the project's costs, but Robel urged other bank executives to cushion budgets for major technology conversions and add extra time to meet deadlines.
Deals in which a bank decides to deploy several products, not just a core system, now are par for the course for most major vendors. However, to have a bank embark on the installation of numerous programs at once like American Savings Bank is still rare for Fiserv, Yabuki said.
"For the last couple of years it is more typical that we would see people buy a large number of attachment products to the core," he said. "This was significant because typically you don't see someone do a 'big bang' conversion of this magnitude. You see different pacing. American Savings Bank saw the different points of value and they wanted to get them in as quickly as they could."
American Savings Bank's makeover is likely a harbinger of things to come for financial technology vendors as midsize banks, especially, try to differentiate themselves and steal market share from their larger competitors. "This group of banks will be launching core banking initiatives that will, I believe, threaten the underbelly of the large-tier market as far as banks are concerned," says Don Free, a research director with the market research firm Gartner Inc. "In most cases as we start getting up the food chain in asset size, the systems are very complex because they're very line-of-business oriented."
"Tackling that and maintaining the integration is very expensive, so most of the CEOs that are being hired for these style of banks are looking to upgrade the foundational support of their businesses with an eye toward providing better value, better cost savings and overall effectiveness of the organization."
Though American Savings Bank recently completed its conversion, it already is seeing signs that its ability to onboard and cross-sell to customers is improving, Robel said, which is significant because of the thrift's unique geographic location.
"What we've done is try to be very creative in a [market] that doesn't grow like the other markets in the mainland," Robel said.
