IBS Sales League Table 2015 (results Jan-Dec 2014)

Who was netting the business in the past year and who has made the turn for the worst? IBS charts the core banking software market activity across the globe, with the results collated in our annual Sales League Table.

The core banking systems market remains a tough one but there are some clear winners and losers emerging as the dust finally settles after the financial crisis. It is not quite business as usual, but at long last there are signs of a modest upturn. However, like the economic upturn as a whole, not everyone is benefiting, with those in the ascendancy being relatively few.

IBS Sales League Table 2015 (results Jan-Dec 2014)

IBS Sales League Table 2015 (results Jan-Dec 2014)

In the three main categories (universal banking, treasury and capital markets, and private banking), there are now between one and three clear market leaders, picking up the bulk of the deals. It will not be a great surprise to industry watchers that all of these are focused companies with one flagship core product. The many other systems that have been brought under single roofs by market consolidation are mostly falling away.

The other trend we see is a renaissance for some of the smaller, local and regional suppliers, again typically without the complication of multiple systems. They seem to be gaining from the more piecemeal approach to core system renewal by some of the large, international banks. Many such banks have given up on their grand plans of past years whereby they were going to standardise all international operations on a single core. In part through painful experience, they are increasingly opting instead for a more pragmatic approach of picking the best system for the local market and, sometimes, giving autonomy back to the country operation for selecting this. The one area where this isn’t the case is private banking, where the opposite is true, with moves by a number of tier one and two banks to rationalise systems across the globe.

It should be stated, for anyone who does not know the process, that IBS has complete sight of all of the bank names behind the numbers. So we know that almost no tier one and tier two banks made decisions in the last calendar year. Even where they did, these were for departmental use (such as wealth management) or for an international operation or two. While the quantity of deals has gone up slightly, the size of deals has not. There were very few high-end domestic or multi-site decisions in 2014.

However, it seems a number of the top end banks have started analysis, once more, of core systems. As a few, such as CBA in Australia, emerge from multi-year projects, with others ongoing after a number of years, it seems a next wave might be on the way. We can expect SAP to feature in some of the analyses, so too perhaps Oracle’s emerging high-end solution, Oracle Banking Platform (OBP).

The heavyweights

In the meantime, the vast bulk of the universal core banking systems market remains the third and fourth tier banks in emerging markets. The two runaway leaders as usual, Temenos with T24 and Oracle FSS with Flexcube, brought in good hauls of lower end deals.

Temenos has remarkable resilience in terms of the number of deals for its T24 core banking offering. Its 37 in 2014 was a slight increase on the 35 of 2013. Its only deals in Western Europe were three low-end ones in the UK, including 6 Towns Credit Union and Reall (previously Homeless International), a microfinance institution focused on the homeless. There was also a small private banking deal in Luxembourg. There was nothing in Central or Eastern Europe. Starting to build on its heightened presence in the US, it gained two small clients, plus Bermuda Commercial Bank. In a traditional market of strength, Canada, it added FirstOntario Credit Union and a small domestic bank.

More productive for Temenos was Asia/Asia Pacific, with four wins in Vietnam, two in the Philippines, and one each in India, Indonesia, Myanmar and Taiwan, plus one deal spanning China, Hong Kong and Cambodia. Incidentally, the vendor’s CEO has recently commented that the sales team in APAC had been too focused on new business and neglected existing clients. The Middle East was fairly healthy too, with six deals in six countries, so too Africa, with seven deals in seven countries, of which three were in North Africa. In Latin America, there were only solitary deals in Bolivia and Venezuela.

How does this compare with Oracle FSS with Flexcube? Its 27 new-name wins was a good haul and well up on 2013’s 15. It was a fairly similar pattern, geography-wise, to Temenos, except without any North American side to it. Oracle FSS’s strongest territory was Asia/Asia Pacific, with three deals in the Philippines (so a busy year in this country), two in Myanmar, one each in Laos, China, Pakistan, Cambodia and Afghanistan, plus a three-site deal for Pakistan, Afghanistan and Tajikistan. There was also a single deal in New Zealand.

It was a like-for-like tally for Oracle FSS in Africa – six deals, six countries, although only one of these was in North Africa. It was sparse pickings in Western Europe – Hampden & Co in the UK and a deal in Denmark, plus one each in Cyprus and Malta – and Central Europe – a solitary win in Belarus. The Middle East only produced single deals in Lebanon and the UAE, while the sole Central and South American win was in a former Temenos stronghold, Mexico (Banco Actinver).

The nine Finacle deals for Infosys were fairly small, compared with past wins for the Indian heavyweight. It had one in the Philippines, Producers’ Savings Bank, and the rest were spread around low-end banks in Africa and Asia, bar the international operation of an Indian bank in the UK. The Finacle business had posted a 5.4 per cent decline in quarter-on-quarter revenue for Q2 FY2015 in October 2014 and, at present at least, the larger-end deals of previous years are eluding it. Those nine deals in 2014 were the same in terms of quantity as 2013. Here, as with the other Indian domestic suppliers, we do not count deals to small domestic Indian banks and co-ops.

One supplier that had a poor year was Path Solutions. We always feel it is a good benchmark for the Islamic banking sector and it brought in a mere four new wins, in UAE, Saudi Arabia, Gambia and Sudan. This was six fewer than in 2013. We ask all suppliers to flag any Islamic banking deals amidst their conventional banking wins and, overall, it looked a depressed year in this sector. It has often been driven by spikes of activity in individual countries, as a result of regulatory changes, but there did not seem to be any of these last year. Some of the emerging countries that might have been expected to produce selections were quieter because of economic and/or political unrest.

When we are looking around for the largest deals in 2014, then the selection of Bancs from TCS Financial Solutions at Bank Yahav in Israel stands out. While TCS is not saying anything about the deal, it was announced in Israel by the bank. The win is broad in scope, including domestic retail and corporate banking, digital channels, wealth management, trade and treasury. The supplier’s other deals were considerably smaller but added up to a reasonable clutch, with another in China, where it has a good track-record, two securities-oriented ones in the US, and one each in France, Oman, India and Colombia (Corpbanca Investment Trust).

SAP is another place to look when trying to find higher end deals. SAP, which is one of the worst at getting any of its wins on-the-record, had a scattering of core banking contracts. Four of its deals were for its newer Deposits Management core banking system but one was for the older Deposits (BCA, as was). The Deposits win was in Austria. The Deposits Management deals came in China (where China Minsheng Bank had a long and troubled project), one in Brazil and two in the US.

Happy regionals

Sales League Table distribution of deals by region 2013 & 2014

Sales League Table distribution of deals by region 2013 & 2014

What about regional suppliers that are benefitting from the growing pragmatism among banks? Acquisitive Poland-based Asseco, for instance, had two deals in Macedonia and two in Serbia for its PUB2000 system, plus one in Bosnia and Herzegovina for its bApO/Antegra system. These and neighbouring countries have often been among the hardest for implementing international systems so that virtually all banks, whether local or the operations of international banks, tend to use local packages.

Similarly, Turkey-based Intertech had a couple of successes from banks in its domestic market for its core banking system, comprising Rabobank for Turkey itself and Ziraat Bank for Germany, plus a win in Azerbaijan at ASB Bank (the first one in the country for this vendor). Turkey has been another country where banks have not prospered with non-Turkish systems so far. Rabobank tends to standardise on a few systems across the globe (particularly Sopra’s Callataÿ & Wouters-derived Sopra Banking Platform, aka Thaler) but appears to have decided that local is best for Turkey. Ziraat Bank, having tried to standardise on TCS’s Bancs, appears to have gone firmly for the local software route, with Asseco also a beneficiary, picking up a deal in early 2015 from the bank for Sarajevo, Bosnia and Herzegovina.

Intertech is, by the way, an example of how our criteria for inclusion in the table always sees a few falling off and a few coming in each year. This is a supplier that looked wholly domestic for a time but is now emerging as a player beyond the borders of Turkey, so qualifies for inclusion.

It could be argued that Sword Apak has been similarly benefiting in the UK from the demand for local solutions, scooping up two more small banks, Julian Hodge Bank for core and Secure Trust Bank for a subset, at least at the outset, of processing (property development lending). While this supplier, albeit with a French parent, has only won deals to date in the UK, the fact that is eyeing business outside the UK is the reason for our inclusion, although it is a borderline case at present.

Sopra Banking Software’s Delta Informatique-derived Amplitude (Delta-Bank, as was) is another regional system, primarily for Africa, and it had a much improved year, with deals in Cameroon, Congo, Democratic Republic of Congo, Mauritius, and Senegal, plus new country extensions (not counted in the supplier’s tally) from Société Générale for Togo and CCEI for Benin.

Also prospering in Africa was another traditional specialist on the continent, Portugal-based Exictos. It gained a couple of start-ups in Angola, Banco Valor in the same country (claimed by Oracle as a Flexcube taker in 2010), and Banco Mercantil de Investimentos in Mozambique. It too gained a county extension from an existing customer, with BPA taking the system for a move into Namibia.

Albeit a solitary deal, it was interesting to see Greek supplier, Intrasoft International, with Profile, gain another African contract, at Centenary Bank in Uganda, following on from a couple of wins here in the last few years. A more traditional player in Africa, Neptune Software, had a handful of deals for its pure microfinance system, Orbit-R, but gained Unguka Bank, a broad, 20 branch bank in Rwanda, for its full Rubikon core system. And India-based Trust Systems & Software had deals for its Trustbank system in Ghana, Liberia and Mozambique.

So all in all, particularly when you look beyond the mainstream suppliers and consider the smaller ones as well, Africa was fairly busy, although with a few obvious countries (Nigeria, Ethiopia and Kenya) showing a lot less activity than in some previous years.

Among the relatively few wins in Latin America, the locals picked up modest handfuls. DL&A with the Bantotal system had single wins in Colombia, Mexico and Uruguay (at the country’s largest bank, BROU).

The rest

Core Banking Systems Sales by % by Month in 2014

Intellect Design Arena (Polaris) chips away at the core banking and lending systems space. It sells a wide range of components for non-core areas (cards, collections, CRM, collateral management etc) but had Intellect Lending deals in Qatar, Egypt and India.
India-based Nucleus Software won a deal for its FinnOne lending system in Zimbabwe, plus one in the UAE and one in Japan, where the supplier has a few long-standing users.

Kuwait-based International Turnkey Systems (ITS), which has experienced some issues in the last year or two, had a couple of wins in Libya for its Ethix core system, plus individual wins in Bahrain, Egypt and Ghana.

Sopra Banking Software’s Sopra Banking Platform/Thaler gained just two new clients: Reiknistofa Bankanna in Iceland, which is owned by the three main banks, the Icelandic Banking Association and the two main payment card processors, and PSA Direktbank in Germany, a new online savings bank owned by Banque PSA Finance.

While FIS only brought in two deals for its Profile system outside the US, both were interesting, comprising another win in India, at Bandhan Bank, and one in Thailand, at Tisco Bank.

The enigmatic Java-based core system from Misys, now Fusionbanking (Bankfusion, as was), had the high profile win at the UK’s Student Loans Company, Bank of Belize (which also took the digital banking component, dubbed Essence), and one off-the-record win at a lending specialist in Southern Europe.

The private banking players

The first place to look for private banking wins is always Avaloq, as it gains the bulk of the large deals that are on offer each year. It was another good year for a supplier that remains in the ascendancy although none of its eight wins were in the category of tier one. Three were deals to traditional, low-end Swiss private banks, with another in Liechtenstein, one for its ASP offering in Germany (BHF-Bank) and two in Singapore (Deutsche Bank and a regional player), plus the previously reported multi-site deal from Isbank (with something of a retail banking slant to the main country in focus, Germany). The supplier’s largest projects are ongoing, from deals in the previous few years, at the likes of Barclays, HSBC and Westpac.

Of course, when considering private banking, other more generalist suppliers sometimes gain the nod, as was the case when Julius Baer opted for Temenos’ T24 in early 2015 (Avaloq came second).

It is debatable whether ERI still qualifies as a private banking specialist because, while this is the focus for most of its user base, deals in recent years have been more diverse, including a line in developing markets central banks. In 2014, it had UK start-up, BFC, which has a high net-worth slant, and a deal with an asset management focus in Kuwait but also the retail-oriented La Poste de la Cote d’Ivoire.

Switzerland-based Sage SA had a notable off-the-record deal for its Prospero system at a private bank for Singapore and Hong Kong plus a front-to-back office win across wealth management and asset management in the Philippines, and another at a family office in Switzerland.

The deals in this space are considerably fewer than pre-crisis, with still sparse pickings in the traditional centres, where once the likes of ERI and Sungard (with Apsys, now Ambit Private Banking), made hay.

Treasury and capital markets

Nowhere is the impact of M&A more pronounced than in this sector. While the two main suppliers to have avoided the consolidation have gained good hauls of deals once more, many others have fallen away.

Calypso’s 14 new-name deals was another impressive tally and included quality as well as quantity. It pulled in the standout deal within the combined selection at two central banks, Banco de Espana and Banque de France. It had three in Africa, with the rest in mainstream trading centres (three in the US, two in Canada, three in Western Europe aside from the central banks, and one in South Africa). It also had one large corporate but these are not included for the Sales League Table.

Murex had a number of corporate deals and pure front office wins (again, not counted in the table) but plenty that were in scope. There was a wider geographical spread than for Calypso, including a couple in Latin America (one of these was Banco Davivienda in Colombia), China Citic Bank International for Hong Kong, one in the Middle East (Bank Muscat in Oman) and one in Russia (Absolut Bank).

The Summit system, now Fusioncapital Summit, from Misys, had a win in China, while Fusioncapital Opics had a solitary new-name win as well, in Indonesia, plus a couple of country extensions from existing users. Misys’ Reuters-derived Fusioncapital Kondor+ gained three deals, in Ghana, Jordan and Vietnam.

Maybe benefitting from the void left by others, Openlink had a good time of things, with seven deals for Findur of which a couple were in Mexico, one in Brazil, and one each in Jamaica, Malaysia, the UK and US.

The same might be the case for Sungard with Ambit Treasury Management (Quantum, as was), which had a decent haul of ten low-end deals. There was a good geographical mix, with the deals coming in Europe (two each in the UK and Finland), Africa (South Africa, Mauritius and Egypt), and one each in Indonesia, Philippines and Australia. The supplier also had two wins for Front Arena, in Germany and UAE.

Conclusion

It will come as a great relief to those involved in the industry to finally see a pick-up, albeit modest, in the overall market in 2014. It might now be that we have a similar pattern to that much shorter, severe slump in 1999, when everyone was focused on Y2K. A number of systems never recovered from the downturn and it was, effectively, the end of the road for them as commercial offerings. Then, as looks to be the case now, others bounced back and resumed more or less where they left off.

The end result of this natural and M&A-derived wastage is a less populated market, which is a problem. Knocking around at the bottom of the Table at present is Oracle’s aforementioned OBP (the one deal in 2015 was for an online loan origination component, so doesn’t count as core) but constitutes a high-end addition to the market that might make it into the mainstream. Other newcomers are notable by their absence at present but perhaps niche offerings can spread their wings. A system such as Intertech’s Inter-face breaking out of its domestic market might add another relatively new system for banks to evaluate. Spain’s Indra is seeking to do the same with its Itecban core system and another Spanish supplier, Nessa, gained a win in 2013/4 at Banco de la Nacion in Peru as it seeks to take its system to the international markets. Perhaps a supplier such as Sword Apak can now do the same. It could be that it is from such one-country players that new options will emerge for the wider market.

What are the hopes for 2015? Well, there was cautious optimism within the supplier community. We asked the suppliers whether they felt 2015 would be better or worse than 2014. Around one-third felt things would improve, with around 40 per cent expecting things to remain more or less the same. That still left around 27 per cent of the belief that things would be worse in 2015 than in 2014, with no real correlation, that we could spot, between the levels of optimism and the geography or size of the suppliers.

It all adds up to a fragmented picture, with some causes for optimism, a still tough market, and only a relatively small number of suppliers that are buoyant. Nevertheless, that’s a happier conclusion than for the previous few years.

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