Formation Targeting Leadership Role in Compliance Software

By Henry, Shannon | American Banker, March 31, 1994 | Go to article overview

Formation Targeting Leadership Role in Compliance Software


Henry, Shannon, American Banker


DENVER -- Formation Technologies Inc. is the smallest of the Big Three compliance software companies.

But for how long?

President R. Gaylord Layton is confident that Formation will continue its phenomenal growth as bankers upgrade their automation systems to take advantage of new technology.

"The mindset of a bank buying compliance software has changed "They say now: "We're going to do it rights.' Bankers are going after computers with a long-term vision."

And, as of today, Formation will have more power behind it.

The Denver-Based company is being bought by John H. Harland Co., a check printing company in Atlanta. Terms of the deal were not made public, but Mr. Layton and Formation's senior management will continue to run the company, according to Michael Rupe, senior vice president of Harland.

Formation's system costs more than either of its two main competitors: Bankers Systems Inc., St. Cloud, Minn., or CFI Proservices Inc., Portland, Ore.

"We're more expensive than both Bankers Systems and CFI, but we provide considerably more value," Mr. Layton said in a recent interview.

His company has close to 2,000 customers; Bankers Systems has 5,000 and CFI serves 2,600 banks.

But Formation has grown at least 30% every year since its founding in 1983. The company has outgrown its current 21,000-square-foot offices. This summer, it will move into 48,000 square feet previously occupied by computer giant International Business Machines Corp.

Formation's 1993 revenues hit $12.5 million, a 65% increase over the previous year. Mr. Layton is looking for a 50% jump in revenues this year, to $18.5 million. The bottom line may be bolstered by a $2.2 million contract to provide software to the Bank of Bangkok in Thailand, he said.

The company's customers obviously like what they are buying: Formation claims 95% of its customers renew their contracts every year. And no customer has brought a claim against Formation's $1 million warranty.

Using the Pedestal

The company's system is called the Pedestal Series. It automates everything from a bank's compliance with Truth in Savings to a customer thank-you note.

To illustrate the system, Formation uses a column.

The foundation of the column is a general data base of the bank's customer information, documents, and products.

The Foundation also includes an artificial intelligence system, called "The Supervisor," to ensure compliance with state and federal banking regualations.

It asks bankers questions as they make a loan or open an account. Depending on the banker's answers, the software generates the proper disclosures or documents to ensure compliance.

The column itself is a series of blocks that accomplish individual tasks, such as processing new accounts or any of a variety of different types of loans.

The column is capped by customer service, including education and training by Formation customers can call with any questions. …

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