Shaking Things To The Core?

Core processing pundits say Temenos will be a worthy competitor in the U.S. credit union market. The Swiss company just bought Akcelerant, a long-established provider of ancillary solutions to several hundred credit unions.

 
 

The Feb. 10 announcement that Temenos had bought Akcelerant for just north of $50 million was a small transaction by Wall Street standards but potentially a big deal in the credit union space.

The Swiss company says the purchase marks a major next step in its move into the North American market. Industry analysts and consultants say it also adds a major player — and a well-regarded real-time platform — to the field of core processors who now compete for the hearts and wallets of U.S. credit unions.

Temenos is headquartered in Geneva and founded in 1993. It says it now has 56 offices that provide multiple financial services solutions to more than 1,600 customers in more than 150 countries.

Philadelphia-based Akcelerant provides its Framework collections, account opening, and loan origination systems to more than 600 financial institutions, CEO and founder Jay Mossman says. That includes more than 450 credit unions.

Mossman claims 18 of the 25 largest credit unions in the country as clients and says Akcelerant is in the sales or contract negotiation stage with four of the remaining seven. The 15-year-old company has been “signing multiple deals per month” across the board, he says.

Mossman adds president of Temenos USA to his title and says Akcelerant will retain its brand. “A Temenos company” will be added as a tagline. Temenos did the same with Trinovus, the 1,300-customer Alabama- and Texas-based banking compliance specialist it bought last year.

Temenos says it has one U.S. customer live on its T24 platform — Independence Bancshares in Greenville, S.C. Seven others have been signed, the company says, and analysts and consultants say they’ve seen Temenos make significant inroads among Canadian credit unions.

“The Akcelerant acquisition strengthens its potential for similar success here in the U.S.,” says Christine Barry, research director for Aite Group. “Credit unions tend to be faster adopters of technology than banks of similar size. Acquisition is a good strategy for entry into this market.”

Of course, Temenos bought a provider of ancillary solutions, not a core processor, but that also makes sense, says the Gonzo Bankers at Arizona-based Cornerstone Advisors. In an emailed reply to several questions, senior directors Scott Hodgins and Sam Kilmer say buying Akcelerant and Trinovus allows Temenos to overcome two major barriers: U.S. regulatory compliance and existing ancillary system interfaces.

They also advised Akcelerant’s existing clients to watch for negative effects on investments and enhancements among products and staff departures — particularly the most creative and entrepreneurial product developers and supporters — at Temenos’ new acquisition.

“It doesn’t always happen, but historically when large, multi-solution corporations buy small, focused private companies, the enhancements of the acquired products can slow down due to focus or management change,” the Cornerstone consultants say.

Mossman says that won’t happen under his watch. “Nothing changes here,” he told CreditUnions.com. “I’m staying. The executive team is staying. There will be no layoffs. No employees will be affected. We’re actually increasing our staff to handle further investment in our products.”

He says he didn’t need to sell the company and had long ago decided on some criteria for doing so. “It had to be good for the employees and good for our products,” he says. “And as for our customers, I wouldn’t do anything that in my view would harm them or our reputation. I’ve built a lot of good relationships over the years.”

As for the competition, core processing and ancillary solutions consultant and contract negotiator John Aranowicz of ICI Consulting in McLean, VA, says he sees the Symitar and Fiserv DNA platforms as the core systems most likely to be affected by the new competition.

Aranowicz says credit union core platforms are “fairly simplistic compared to bank cores” but that they do now require real-time processing. That’s why DNA has been successful, Aranowicz says, although he says it has not performed as well in commercial banking because it does not have the kind of lending capabilities that credit unions would need if they want to get more into business services.

“T24 (Temenos’ platform) has all of the above. A credit union would have very high-end abilities without giving up the real time. And with their SaaS model, their price structure should also be accommodating,” he says. Adding Akcelerant’s well-received tools allows Temenos to offer a more complete suite from a single vendor, something credit unions are used to, Aranowicz adds.

That resonates with the signals out of Geneva.

Temenos CEO David Arnott told Forbes, “FIS, Jack Henry, and Fiserv have their own cores. These guys are kind of getting squeezed out. We wanted to come into the U.S. market with our real-time, modern, rich channel solutions with embedded analytics and modular architecture, but if you go up against these incumbents with just a core, you face difficulties. The opportunity here is to use the customers of Trinovus and Akcelerant to sell our core.”

Mossman sounds a slightly different note. “We want to sell more, but we don’t want to undermine what the other cores are doing,” he told CreditUnions.com. “We’re not looking to be disruptive to a credit union that already has a core they’re happy with. My philosophy has always been to help our customers solve problems where they want them solved.”

 
 

Feb. 19, 2015


Comments

 
 
 
  • More M & A activity in the LOS market...Another Big Boon for MeridianLink!
    John Saunders
     
     
     
  • It's a little odd that there is no mention of other core processors out there that have real time fully embedded solutions like CU*Answers. CU*Answers offers expertise in implementing technical solutions to operational needs, and is a leader in helping credit unions form strategic alliances and partnerships. CU*Answers also provides a wide variety of services for credit unions including its flagship CU*BASE® processing system (online and in-house) and Internet development services featuring It’s Me 247 online and mobile banking. I didn't see any mention of that from Temenos. Additional services include web development, network design and security, and image check processing. Again, will Tenemos have these offerings? It doesn't sound like it. CU*Answers was founded 40+ years ago and is a 100% credit union-owned cooperative CUSO providing services to credit unions representing nearly 1.5 million members and $12.6 billion in credit union assets. So we really listen to our cu clients. For more information, visit www.cuanswers.com.
    Jerry COllins
     
     
     
  • Thanks, Jerry. We always appreciate feedback. This column was not about the core processing market in toto. It was about Temenos and the competitors that several consultants and analysts said they expected the new market entry would affect. On that point, conventional wisdom has it that competition is shrinking in the core market for credit unions, even to where I've seen some punditry that holds that all smaller cores are doomed as the number of credit unions shrink. I don't buy that and our vendor data at Callahan doesn't really bear that out, either. That's why I left out the word "narrowing" in this sentence: "Industry analysts and consultants say it also adds a major player — and a well-regarded real-time platform — to the 'narrowing' field of core processors who now compete for the hearts and wallets of U.S. credit unions." There's been some shrinkage, of course, but there are a lot of core processing options still out there, and no one seems to be seriously questioning their ability to scale as credit unions get fewer and larger.
    Marc Rapport
  • So one bank and zero credit unions currently on T24? I don't think either Fiserv or Jack Henry are quaking in their boots just yet.
    Jody M
     
     
     
  • Thanks, Jody, for your feedback. Yep, time will tell.
    Marc Rapport