Improved lending
An area of focus for many banks over the last few years, often with a systems consolidation aspect to it, is loan origination. In many banks, it remains a disjointed and largely manual task. This is a problem from an efficiency perspective but also, increasingly, from a regulatory one, meaning there is not a clear audit trail of the advice and steps taken when onboarding the customer.
One bank that has tackled this has been First National
Bank of Long Island (FNBLI), which has been one of the first users of what is intended to be a broad, flexible origination platform, spanning commercial, consumer and mortgage lending, from its core system supplier (with Signature), Fiserv. FNBLI previously had an ageing loan origination solution
for its residential mortgage lending which had been ‘bastardised’ to also cover home equity lending. There was a desire to move into small business credit scoring and the bank was looking for a system to fill this need. It came round to the idea of a single loan origination platform to support its broadening activities. The existing system had been primarily for broker-type residential mortgage businesses and was lacking functionality, including dynamic forms. This was also a bank moving from in-house systems to
Conclusion
As elsewhere around the globe, core banking implementations in the US do not always go to plan. However, the typical conservatism of the market (e.g. Hawaii National Bank wanting a system with at least 100 users) means that nearly all banks go for the tried and tested. A platform rejected by one bank as outdated might equally be selected by another.
It is easy to blame US banks for this trait, which constitutes a block to new entrants (whether domestic or international), and suggest that they end up with the systems that they deserve (fairly old, for the most part). However, the few pioneers, such as some of those taking Fiserv’s Acumen or Union Bank of California with Infosys’ Finacle, often end up the way of many pioneers, having a less than happy time of things. One system that flickered briefly was called Single
Source from a 2004 start-up, New Core Banking Systems. The co-founders were John Aranowicz who, among other things, had worked at Harrisburg PA-based Pro-Soft, a reseller of the Sparak core banking system (which ended up in D+H by way of Harland), and Randy Clements, who was involved with an imaging system, Bankware (Pro-Soft and Bankware were both sold to FIS in 2004). New Core Banking Systems sought to build a new
hosted. FNBLI ‘wanted to get out of the software business’, said Rich Kick, the bank’s executive vice-president. Patelco Credit Union, a California-based institution with $3.9 billion in assets, is another to have addressed its lending operations. It signed for SS&C’s LMS Loan Suite to process its commercial and secondary market portfolios. Patelco had been looking for a new solution for over two and a half years, and it finally settled on SS&C’s offering in October 2012.
Cory Schwab, vice-president of commercial and secondary market loans for Patelco, said the increasing complexity of the secondary loans market and the desire to expand into other asset classes had driven the change to LMS Loan Suite. It was intended to cover the entire lifespan of the loan including origination, funding, tracking, principle and interest payments, changing loan rates and keeping information about the borrower and guarantors. ‘We needed to identify a platform that could not only handle the past and current portfolio we’ve taken on, but also to be able to facilitate and enhance it,’ said Schwab. LMS Loan Suite was taken to cover a full range of products at Patelco, including the commercial and secondary market portfolio (which includes any commercial real estate loans), loan pools, government guaranteed loans and other asset classes such as energy credit.
offering. In 2007, it gained Berwick PA-based First Keystone Bank as the first taker. In early 2009, Carolina Bank in Darlington, South Carolina, apparently became the first to cut over.
However, there was then a merger agreement with RDSI, a subsidiary of State Bank of Defiance Ohio and Trust Company. RDSI had been a reseller of Fiserv’s Premier but this agreement had been terminated (RDSI apparently had around 75 customers for this system). State Bank of Defiance Ohio intended to take Single Source as part of the merger deal. Things became messy, with Fiserv suing RDSI for alleged breach of contract and with the merger between RDSI and New Core Banking Systems then falling through, resulting in another lawsuit, which was settled in November 2012. By this time, Aranowicz had joined Cobiscorp as president and CEO for North America. Cobiscorp is a US-based company but almost all its business is in Latin America. Aranowicz left Cobiscorp in August 2013 and remains keen to revive Single Source. Currently, the few new supplier entrants are down in
the credit union space, leaving most other tiers of financial institutions in the US looking at a long-standing range of systems, residing in the hands of fewer and fewer suppliers due to industry consolidation. Those systems have attracted R&D over the years and have evolved as a result, but the vast majority have very long roots.
US Financial Services Technology Market Report |
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