Research firm Celent paints a gloomy
picture of spending on technology by financial institutions
worldwide in 2009, predicting a fall of 1.3 percent to $353.3
billion. Leading the way will be Europe with a 3.4 percent decline
to $130.3 billion followed by North America with a 2.7 percent
decline to $116.7 billion.

“The financial crisis and economic uncertainty
have financial institutions tightening their belts,” said Jacob
Jegher, senior analyst in Celent’s banking group. George Ravich, Fundtech

“Banks in all regions of the world are
experiencing difficult conditions,” he stressed.

Undoubtedly true, but even in the toughest of
economic times opportunities present themselves, as US banking
software and services company Fundtech is discovering.

“This is a tough year and one would imagine
that any company selling software to banks would be experiencing
considerable difficulty,” George Ravich, Fundtech’s chief marketing
officer, told EPI.

But quite the opposite holds true.

“Fundtech is enjoying tremendous interest in
its products,” said Ravich.

The reason is simple: big banks are not the
only game in town.

In the US, explained Ravich, most big banks
are in trouble but this does not apply to a myriad of small and
medium-size banks which, by and large, are run conservatively and
were not exposed to what proved to be a disaster for their large
counterparts, subprime residential mortgage securities.

“Many smaller banks have extremely strong
balance sheets,” stressed Ravich.

This has put smaller banks at an advantage to
the big banks which are battling with under-capitalised balance
sheets and, in many instances, reducing credit lines available to
corporate customers. Many small- and mid-sized corporates seeking
additional capital or just wanting to reduce the risk of being
exposed to the whims of one big bank are thus turning to the
smaller banks, explained Ravich.

“Small and medium-sized banks are seeing
substantial new deposits and credit lines,” continued Ravich.

To a lesser extent this is also happening in
Europe where many small and mid-sized banks are also seeing lots of
opportunity, he added.

A key part of Fundtech’s strategy is to assist
these banks consolidate their new-found corporate customer base
into a full service relationship, said Ravich. Fundtech is
discussing with smaller banks how upgrades of their key business
areas such as cash management and payments systems can assist them
in achieving this.

Huge opportunity

Smaller banks represent a huge
potential market in the US where, according to the Federal Deposit
Insurance Corporation, only 84 out of a total of 7,146 commercial
banks at the end of September 2008 were in the big league, boasting
total assets of over $10 billion.

In the US, Fundtech is introducing new
products to address the needs of smaller banks, said Ravich.
Particular focus is on expanding the reach of Fundtech’s PAYplus
USA, a hosted funds transfer solution designed for larger banks and
in use by more US financial institutions than any other similar

Fundtech’s intends making PAYplus USA
available to smaller banks at a significantly lower cost, though
with fewer options that can be customised. Differing slightly from
the normal concept of software as a service (SaaS) because of some
minor upfront set-up fees, it will be very much in line with the
SaaS concept in that banks will be charged in accordance with the
number of wire transfers sent, said Ravich.

In Europe, Fundtech is also pursuing
opportunities to enable small to medium-size banks to compete on an
even footing with their larger counterparts, particularly in the
Single Euro Payments Area (SEPA) environment.

“We are very involved in SEPA,” said

A key initiative in the SEPA market is the
launch by Fundtech of its PAYplus ServiceBureau which offers
solutions combining its PAYplus funds transfer service and its
SWIFT (messaging) ServiceBureau.

The new service, which provides banks with a
complete global payments solution priced on a pay per transaction
SaaS basis, is housed in Fundtech’s Biveroni Batschelet Partners
(BBP) unit located in Baden, Switzerland. Specialising in the
integration of inter-bank applications since its founding in 1986,
BBP was acquired by Fundtech in 1999. BBP is the world’s largest
SWIFT service bureau.

With its new service, Fundtech’s intention is
to offer banks of all sizes a low-cost and easy-to-implement
alternative to in-house payments processing that will enable them
to offer SEPA direct debits and compete effectively in the global
payments market. The cost of an in-house developed SEPA direct
debit solution can run into millions of dollars, noted Ravich.

Ravich is also optimistic about SEPA despite
it being plagued by problems.

“It [SEPA] has got to work. You can’t have a
unified Europe without a unified cross-border payments system,”
said Ravich.

He added that SEPA will be “great for
consumers and businesses” but conceded that banks face a costly
transition period.

Notably, a survey of 23
major European banks undertaken by Fundtech in 2008 revealed that
44 percent of respondents believe that it will take longer than
five years
to replace revenue lost because of SEPA pricing
mandates, while 13 percent believe they will never recover lost

Opening new revenue

The survey’s findings in many
respects reflect pressure of increasing regulatory costs, margin
compression and competition from alternate payments service
suppliers that banks worldwide find themselves facing. The
solution, stressed Ravich, is that banks must actively seek to
introduce new fee-generating customer services.

Ravich believes banks have significant
opportunities to enhance the level of service offered to their
corporate customers to the benefit of those customers and
themselves. In essence, this involves extracting greater efficiency
out of what he terms the financial supply chain.

The financial supply chain is analogous to the
physical supply chain in, for example, the retail and manufacturing
sectors where the objective is to hold the minimum inventory
required to function efficiently, thus reducing demands on working
capital. This is generally referred to as a just-in-time inventory
strategy which in the financial supply chain equates to a
just-in-time cash strategy, said Ravich.

A key element of the financial supply chain
requires that a bank be positioned between its corporate client and
their trading partners and suppliers in the electronic invoicing
space, the source of vital data required for effective cash

“The bank in this position can see invoices
coming in to their corporate client and invoices being sent out by
that client, therefore knowing precisely what cash the client has
going out and coming in,” said Ravich.

Given this vital cash-flow data a bank can
sell a multitude of fee-based cash management services and trade
credit to its corporate clients, he added.

Adding significantly to Fundtech’s product
offerings in the cash management space is Accountis, a UK-based
electronic invoice presentment and payment
(EIPP) systems
specialist acquired in February 2008.

The first significant new customer win for
Fundtech subsequent to acquiring Accountis was the Royal Bank of
Scotland (RBS) which in June 2008 announced it would offer
Accountis’ EIPP solution to its corporate clients as an RBS-branded

Again highlighting a growing trend towards
employing white labeled solutions, Accountis’ EIPP solution is
available to banks on a SaaS basis. High-speed internet
communications have made it possible for banks to go the
outsourcing route rather than build often costly in-house
solutions, noted Ravich.

He added that banks are increasingly sourcing
services from outside technology suppliers, a trend ideally matched
to Fundtech’s strategy.



Ranked by total assets, 30 September


Number of banks

Under $100m


$100m to $1bn


$1bn to $10bn


Over $10bn




Source: Federal Deposit Insurance