Application Software: Who, What and Why

By Schindler, Roger N. | American Banker, July 17, 1986 | Go to article overview
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Application Software: Who, What and Why

Schindler, Roger N., American Banker

Application Software: Who, What and Why


When deregulation turned the staid world of banking on its head back in 1981, it also triggered a boom in the applications software industry. Suddenly, financial institutions had to fight to survive. Free of many of the governmental restrictions that had made banking products and services homogeneous in the past, they now needed to differentiate themselves from each other. They also had to contend with the financial services companies that were busy luring customers away.

To compete, financial institutions turned to technology, and specifically to application software. Their goals were:

The ability to create and introduce new products and services quickly as market conditions altered;

The ability to look at customers in a relational manner, as the sum of all their accounts, rather than on an account-by-account basis;

The ability to improve service to prevent customers from walking out their door and into the bank around the corner;

The ability to offer banking services electronically, seven days a week, 24 hours a day.

Many of the success stories in the past five years have been about institutions that were able to mesh efficiently their business strategy with their technology. Losers, on the other hand, were often institutions that lacked the proper systems to accomplish business plans.

The demand for application software for financial institutions continues strong. "It's a big, thirsty and underserved market,' in the words of Donald Steele, Vice President and General Manager, Financial Systems Div., UCCEL Corp.

Financial institutions continue to look for software packages that will help them gain a competitive edge. The selection process alone for major systems can take years, and any purchase is a major investment.

Furthermore, the very definition of banking is undergoing changes that impact software needs. Mergers and acquisitions and interstate banking are just a few of the trends causing financial institutions to reevaluate their software systems.

Meanwhile, of course, technology itself continues to evolve. Recent developments include various approaches to system integration, distributed processing, micro-to-mainframe linkages and the spread of on-line, realtime computing.

Based on a national survey of over 1500 U.S. financial institutions performed by Trans Data Corporation in January of this year as part of our on-going measurement of the financial industry, this article will discuss:

1) What types of application software financial institutions are using and who are some of the major vendors;

2) What application software institutions plan to buy over the next 12 months and from whom;

3) What type of hardware--mainframe, minicomputer or microcomputer --the application software used by financial institutions runs on; and

4) How important on-line capability is for various applications.

Deposit Systems

Deposit and loan systems from the core of most financial institutions' data processing systems. Deposits include demand deposit accounts, time deposits (including retirement accounts) and certificates of deposit. Loans include commercial loans, installment and consumer loans and mortgage loans.

Redoing the core systems has been and remains the preoccupation of many financial institutions. They are looking for flexible, on-line systems to enable them to introduce new products and services, or modify existing ones in a rapid manner to respond to market forces. They want software that uses parameterization of products and services, eliminating the need to make changes in code. Additionally, they must be able to enter a change once and have it reflected throughout their systems.

Institutions of all sizes are in the market for core software systems.

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