Automated Teller Machines¹

Automated teller machines, commonly known as ATMs, have a ubiquitous, worldwide presence as fast and convenient kiosks where bank customers can withdraw small amounts of cash. ATMs were so revolutionary to the banking industry that former Fed Chairman Paul Volcker stated in a 2009 speech that the ATM has been the “only useful innovation in banking.” The roots of the development of the ATM stem from the self‐service culture arising in the 1950s and 1960s.

This shift began in Europe in 1967 when some of the earliest ATMs were deployed by British and Swedish banks. In response to unions' calls for more favorable hours for bank tellers, European bankers employed engineers to build automated teller systems that would provide customers with access to cash at all hours of the day. The result of these collaborations was the deployment of the world's first ATMs in 1967, the Bankomat in Sweden and Barclaycash and the Chubb MDR in the U.K. These deployments were made possible by technological innovation that had been advancing through the 1960s—mainly algorithms that allowed these pioneer machines to associate a customer's unique PIN number with his or her bank account and video display units to direct customers through transactions. The biggest issue for these cashpoints (as they were and are commonly referred to in Europe) was creating a computer system that would allow them to connect to the computers in the banks, which is where IBM got involved. IBM began working with Lloyds Bank in 1973 to develop the IBM 2984, the first truly modern ATM.

ATM innovation was not limited to European banks, as an engineer named David Wetzel introduced the first ATM in the United States in 1969. Wetzel's ATM, the Docuteller, was first introduced at Chemical Bank in Rockville Centre, New York, in September 1969. The rudimentary machine would disperse a fixed amount of cash when customers inserted a specially coded card. The introduction of the ATM was so revolutionary to Chemical Bank that it proclaimed, “On September 2, our bank will open at 9 and never close again.” In 1971, Docutel, the maker of the Docuteller, and Diebold began manufacturing ATMs in the United States for widespread distribution. U.S. banks began adopting the ATM in efforts to stay ahead of the technology curve. Whereas buzzwords like blockchain and big data are driving today's FinTech environment, banks saw buzzwords like self‐service and automation as key drivers of ATM adoption. As ATM use and adoption in the United States became more widespread throughout the 1970s, Diebold and NCR became the industry leaders in ATM manufacturing and worked to turn ATMs into the sleek, modernized units they are today. To cap off the first real decade of ATM adoption, in 1979 banks began to utilize computer switching systems that would allow customers of other banks to use their ATMs for a fee. The 1970s laid a solid foundation for ATMs to become a part of everyday American life as innovation continued to improve the machines.

The 1980s saw ATMs mature into sleeker, more modern machines that would become much more reliable and user‐friendly than earlier versions. NCR and Diebold continued to dominate the ATM manufacturing industry in the United States and began to add many of the features that we know today. Some of these features included advanced video display units, programmable buttons, cash that was dispensed horizontally, and expanded functionality. Most banks adopted these modernized ATMs by the 1980s, as they were a considerably better use of capital than they had been in their developmental stages. By the 1990s, ATMs became available virtually everywhere in the United States, made possible by the modernization of digital telephoning and use of Windows OS in ATMs. Banks could now run remote diagnostics on their ATMs and virtually manage the internal processes from anywhere. The key implication of this improvement was the creation of independent ATM deployers (IADs), which are third‐party ATM vendors not associated with any bank. IADs began to place ATMs in high‐frequency locations such as malls and convenient stores, further dotting the landscape with the cash machines. Because of these advancements, today there are more than 420,000 ATMs in use in the United States.

One of the more recent innovations includes interactive teller machines. These machines connect customers to live tellers in call centers via video call, allowing customers to receive assistance at ATMs in real time. NCR rolled out 350 of these machines in 2013.

Mobile payments and digital wallets are perhaps today's biggest threat to ATM manufacturers and banks that rely on ATMs for revenue. According to a report from the American Banking Association, only 13 percent of bank customers are using ATMs to manage their accounts, down from 17 percent in 2009.^2,3 Customers also report visiting ATMs less frequently, the most common response being “once every two weeks,” down from “once or twice a week” in 2009. This trend is evident in the growth in ATMs as they have been growing at a faster pace globally than in the United States. The United States also appears relatively saturated with a significantly higher number of ATMs per 100,000 people than the rest of the world and also four‐to‐five times as many ATMs per 100,000 people as there are physical branches per 100,000 people.⁴

Electronic Stock Trading

The practice of owning and trading shares of an organization to realize a profit dates back to the era of the Roman Republic, in which the orator Cicero articulated in a speech that a trade group's “shares had a very high price at the time.” Many scholars mark the birth of the modern stock market as we know it when the Dutch East India Trading Company began issuing shares of corporate stock to the public in the early 1600s. In the United States, New York brokers formally organized the New York Stock and Exchange board in 1817, which was renamed the New York Stock Exchange in 1863. All that to say the owning and trading of stocks by investors has gone on for a very long time, but technological advances in the last 100 years have led to the widespread proliferation of electronic stock trading. Electronic stock trading has made stock markets more accessible to a wider portion of the population and lowered the cost of trading stocks, leading to the highest levels of trading volume ever seen in markets. However, stocks did not begin trading electronically overnight. Technological advances in the past century, and particularly the past 50 years, have grown electronic trading from its most rudimentary form of the late 19th and early 20th centuries to today's high‐speed, automated trading environment.

Before the use of the telegraphic and stock tickertape became widespread, stock prices were communicated through word of mouth and in aggregated summaries that were circulated at the end of a trading day. In 1867, tickertape stock price telegraphs were invented by Edward A. Calahan, an employee of American Telegraph Company. These telegraphs represented the first automation of stock prices and allowed prices to be relayed to investors rapidly and accurately. Brokers and speculators could now gather in centralized locations with tickertapes to buy and sell stocks. By the 1880s, there were around 1,000 of these tickertapes in use around New York City, creating some of the earliest American stock markets. These early markets became known as “bucket shops.” A typical bucket shop consisted of one clerk reading the tickertape to another clerk, who wrote the stock prices on a chalkboard while speculators bought and sold shares of the listed stocks. This system led to a great deal of fraud and extortion. In the wake of the Stock Market Crash of 1929, bucket shops disappeared as a result of increased regulation. During this regulation of the markets during the 1930s, modern exchanges such as the New York Stock Exchange and Chicago Board of Trade were created as strictly regulated entities devoid of the chaos that often came in the bucket shops. The creation of these modern exchanges laid the foundation for the widespread proliferation of electronic trading.

Electronic stock trading took another step forward in 1969 when Instinet, the world's first electronic communication network for the buying and selling of securities, went live. Brokers could now post buy and sell offers at any time of the day, even after markets had closed. In 1971, the National Association of Securities Dealers created the NASDAQ, which would automate stock quotes by posting bids and offers on an electronic bulletin board. The NASDAQ vastly lowered the spread on stock prices, initially making it unpopular among brokerages, which made their profits on spreads. The NASDAQ also created the first electronic over‐the‐counter (OTC) market in which trades did not take place on a physical exchange. Before 1971, OTC trades took place over the phone or the wire, but the proliferation of the NASDAQ allowed quotes to be read and trades to be executed over an electronic network.

The New York Stock Exchange also created its Designated Order Turnaround (DOT) system in 1976, which allowed trades to be sent to specialists on the floor of the exchange. This system was replaced by the SuperDOT in 1984, which had the capability to allow investors or brokers to enter a trade into the system and have it sent to an agent on the NYSE floor upon entrance. The investor or broker would then immediately receive confirmation of the transaction from the system.

Most investors never directly used the SuperDOT, but rather software or online services offered by brokers. After the stock market crashed again in October 1987, the NASDAQ enlarged its small‐order execution system (SOES) to give dealers the ability to execute smaller trades electronically rather than over the phone when broker‐dealers stopped answering their phones in the aftermath of the crash. This gave rise to individual, electronic “day traders.” In the late 1980s, the NASDAQ also launched its first electronic communications network. ECNs, such as Island, began to pop up across the trading landscape, which furthered the rise of day traders, who could set their own prices.

By the mid‐1990s, the New York Stock Exchange had begun the process of becoming fully automated with the introduction of wireless handheld computers to receive and execute trades. Today, all stocks on the New York Stock Exchange can be traded electronically, whether for immediate execution or to be sent to the trading floor of the exchange. The SEC also authorized electronic exchanges in 1998, which would allow high‐frequency trading to proliferate. High‐frequency trading is driven by massive computing power and complex algorithms, allowing trades to be executed in nanoseconds. This provided further liquidity and further narrowed spreads in the market, making trading and investing even cheaper and more accessible. From 2005 to 2009, the proportion of high‐frequency trades in total equity trading grew rapidly and peaked in 2009 at approximately 60 percent of total equity trades. Since 2009, high‐frequency trading has declined as a proportion of total equity trades to below 50 percent but still well above 2005 levels of 20 percent.⁵

Visa

Visa was founded in 1958 after Bank of America launched a consumer credit card program called BankAmericard for middle‐class consumers and small to midsize merchants in the United States. It had a rocky start before becoming reasonably profitable but was then challenged by the issuance of a rival card called MasterCharge (a forerunner to MasterCard) by some other California banks. Bank of America's response was to franchise BankAmericards nationwide, which then sparked a trend of other banks responding with their own proprietary cards and franchise systems. Interestingly, the banks were largely focused on issuing the cards to consumers and a number of cards were mailed to various parties.

With so many cards issued, fraud was rampant and a number of the banks were losing money; therefore, in the late 1960s, Bank of America had a meeting among its licensees to find a solution to address the problems of BankAmericard. Coming out of that meeting was the start of the more formal Visa enterprise. It was decided that Dee Hock, who at the time was a VP at a licensee bank but would later become chairman of Visa, was to study the issues. In mid‐1970, control of the BankAmericard system passed to a new entity called National BankAmericard Inc., which was later renamed Visa International with Dee Hock as CEO.

Visa was structured as a non‐stock, for‐profit membership corporation with ownership in the form of nontransferable rights of participation. The organization was intended to operate in a highly decentralized and collaborative manner. It had an interesting paradox in that the financial institutions that were members of the corporation were also fierce competitors as they each issued cards attempting to attract the same pool of customers, but they also had to cooperate such that merchants would be able to take Visa cards issued by any bank at their locations. Thus, Visa had an underlying theme of both intense cooperation and competition among the participating bank partners.⁶

Significant corporate milestones for Visa include expanding internationally in 1974 and introducing the debit card in 1975. In 2007, the regional Visa businesses were merged and the company IPO'd in 2008. It was one of the largest IPOs in history. Presently Visa operates in over 200 countries and its services are available on a multitude of devices (cards, laptops, tablets, mobile devices).⁷

MasterCard

MasterCard was formed as a competitor to BankAmericard by six California banks in 1966. MasterCard's business was primarily conducted through the principal subsidiary, MasterCard International, a Delaware membership corporation that was incorporated in November 1966 until MasterCard Inc., a Delaware stock corporation, was incorporated in May 2001. Similar to Visa, MasterCard was owned by financial institutions until its IPO in 2006. In 2002, MasterCard moved from a member association to a private share company and began making filings with the SEC.⁸ MasterCard is the second‐largest card network but the IPO has commonly been cited as a catalyst for the company.

MasterCard's performance since IPO has been phenomenal. MasterCard's annual ROE has been in excess of 40 percent from calendar 2009 through 2015. Key drivers of growth since the IPO include:⁹

• M&A activity
• Focus on new markets—e‐commerce, mobile, prepaid (which helps the underbanked)
• Broadened focus—not just on the large players but also the small and midsize issuers
• Able to have more of a negotiating process with issuing and acquiring banks since they are no longer owners
• A better relationship with vendors, who no longer feel they are being overcharged
• Promoting debit and not just credit cards

An impetus for the IPO for both Visa and MasterCard was a litany of antitrust lawsuits brought by merchants who felt that MasterCard, Visa, and major banks were colluding on the cost of interchange. The IPO helped to change the ownership structure, which was being closely scrutinized, and reducing bank ownership. MasterCard management also attributed the IPO with the ability to compete more effectively following a rapidly evolving and dynamic environment as the payments industry underwent significant changes since mid‐2000.

Key Takeaways from the Visa and MasterCard Examples

Both the Visa and MasterCard examples are interesting templates for FinTech companies today in that a bank partnership model was effective as they grew, but then once it got to a certain size it transitioned to a more traditional ownership structure. Both structures helped the company compete and thrive during different stages of the corporate lifecycle. Additionally, the IPOs of both Visa and MasterCard created profits for a number of banks as both were owned by banks at the time of their IPO.

FiServ

FiServ Inc. is a global financial services technology provider based in Brookfield, Wisconsin. FiServ was created in 1984 as the result of a merger between two smaller pioneer bank technology firms, First Data Processing and Sunshine State Systems. FiServ operated as a privately held company for two years before going public in 1986 as a $70 million data processing business serving large financial institutions. FiServ's IPO occurred on September 25, 1986, at a price of $1.10 per share under the ticker symbol FISV.

After operating profitably for several years, FiServ began an aggressive corporate strategy of acquiring smaller firms to increase their capabilities and customer offerings. FiServ's first major acquisition came in 1994 when it bought out Citicorp Information Resources, a division of Citi Group. This strategic move expanded FiServ into the commercial banking space and greatly increased its customer base. FiServ also was certified with the ISO 9000 standard of quality in 1994, which ensured that the company was meeting both the needs of customers and regulatory requirements related to their suite of products.

FiServ continued its aggressive strategy into 1995 with the acquisition of Information Technology Inc. The acquisition of ITI made FiServ the leader in client/server solutions and would prompt the launch of Fiserv.com later in the year. On the heels of this tremendous growth, FiServ announced it had surpassed $1 billion in revenue in 1998, firmly establishing itself at the forefront of bank technology solutions.

The company's largest acquisition to date occurred in 2007 when it bought CheckFree Corporation for $4.4 billion in cash. This massive transaction gave FiServ electronic billing and payment capabilities to offer to their clients, which have proliferated across the banking industry.

In 2008, FiServ launched its first mobile banking system, which created banking access in text message, web browser, and app form. FiServ's latest innovation, PopMoney, launched in 2012 and enables banks to offer instant person‐to‐person transfers and payments to their customers.

Thus, through acquisitions and innovation, FiServ has been on the leading edge of the introduction of many of the new services being offered by FinTech startups today. In 2016, FiServ generates over $5 billion in revenue annually, has more than 170 patents issued or pending, and has seen double‐digit EPS growth every year for the past 30 years.

Per its website, FiServ defines itself as a financial services technology provider, but is fundamentally very different from the disruptive FinTech companies that have popped up in the past few years. Given that FiServ has been in operation since 1984, it has gained the scale needed to be at the forefront of the FinTech industry as a leading player.

While many FinTech startups look to disrupt the business models of banks, established FinTechs like FiServ attempt to facilitate innovation in banks and lead them through a dynamic technological landscape. FiServ CEO Jeff Yabuki articulated this role in Fiserv's recent annual shareholders' meeting in May:

The big difference is we don't view ourselves as being disruptors to our clients. We view ourselves as being enablers. And so by investing in innovation, by investing in technologies that deliver new experiences, we believe that we will equip our clients, the banking industry, the billers, and frankly even our end consumers to be able to perform even better versus some of the FinTech alternatives that are out there. So we view ourselves as partners, not as disruptors.¹⁰

As previously mentioned, FiServ experienced tremendous growth beginning in 1994 through its aggressive strategy of acquiring emerging companies and leveraging these companies' innovations to better serve their clients. FiServ's largest deal to date, its acquisition of CheckFree Corporation, was lauded as the deal that would “bury independent, pure‐play options for banks' back offices” and sent shockwaves across the bank technology industry.¹¹ Both companies mutually benefited from the transaction as FiServ gained access to CheckFree's electronic bill‐pay technology and CheckFree could showcase their product on a larger platform while both gained access to each other's extensive client book. One analyst took on a less positive view of the deal, stating, “After years of…failing to emulate chief competitor Metavante in growing organically its own payment processing business, Fiserv has finally reverted to its primary skill—using its stock as currency to grow the company by acquisition.”¹² While this may be true, the strategy has served FiServ well as evidenced by the steady growth of its EPS and revenue as well as the consistently favorable performance of its equity in the market.

In conclusion, as one of the earliest FinTech pioneers, FiServ is in a position where it does not have to disrupt the industry to make a name for itself as many FinTech startups are forced to do. Rather, FiServ can willingly act as strategic partner and facilitator with banks to help them improve their processes in order to better serve their customers through sleeker platforms, new innovations, and enhanced security measures. Furthermore, FiServ has clearly benefited from its strategy of acquiring emerging FinTech companies through leveraging their technologies rather than trying to build new technology in‐house. While this has created a corporate structure that makes FiServ look more like a large holding company made up of many different smaller entities, the strategy has allowed FiServ to offer a diverse suite of products to banks of all sizes and the customers of these banks.

FIS™

FIS is a large global provider of bank and payments technology based in Jacksonville, Florida. FIS was founded in 1968 as a data processing company based in Arkansas called Systematics. In 1990, Systematics was acquired by Alltel and rebranded as Alltel Information Services. Alltel Information Services was acquired by Fidelity National Financial in 2003 and again renamed, this time as Fidelity Information Services.

Since its most recent incarnation as FIS, the company has experienced tremendous growth through a combination of strategic acquisitions and organic growth from within. As a result of this growth, FIS has become the world's largest global provider of banking and payments technology and a member of both the Fortune 500 and the S&P 500. FIS offers a large suite of products and services designed to serve the entire scope of the banking industry from smaller community banks to large investment banks spanning the globe.

FIS's growth strategy in the past ten years has been aided by its willingness to acquire and merge with other companies to increase capabilities and market share. FIS began to gain the scale to establish itself as an industry leader in bank technology when it merged with Certegy in 2006. With the merger, Certegy was meant to be the surviving entity, but changed its name to Fidelity Information Services and relocated to Jacksonville, Florida, leaving FIS as the de facto surviving entity. The newly formed FIS could now offer payment processing services, as Certegy was an industry leader in check verification and credit card processing. FIS began trading on the New York Stock Exchange in 2006 after completing the merger with Certegy. The combined company became Fidelity National Information Services and traded under the ticker symbol FIS.

FIS's next big move came in 2009 when it acquired its chief competitor, Metavante Technologies Inc., for around $3 billion. The move was beneficial for both companies as FIS could capitalize off of Metavante's strong U.S. footprint and Metavante could leverage FIS's global presence to present its products to a wider customer base. The deal sent shockwaves throughout the FinTech industry, catching many off guard as Metavante was not considered to be an acquisition target since it held a very large market share in competing with FIS. Bob Hunt of TowerGroup commented on the massive implications of the deal:

I did not foresee a deal between these two companies because they're both so big in the market. You always think of [FIS and Metavante] as the two survivors. This is probably the most significant acquisition we've seen over the last 10 years.¹³

Hunt would go on to observe that with the acquisition, FIS would now serve around 50 of the top 100 banks in the deposit processing space. For FIS, the most attractive factor in expanding its business through the acquisition of Metavante was the ability to leverage Metavante's extensive payment processing network, which had been in use in banks worldwide, whereas FIS's payment processing network was more confined to domestic banks. Further, in observing the effects of the acquisition on the bank technology industry, Bob Meara of Celent commented that “this will bring FIS up to roughly the same scale as FiServ, leaving OSI [Open Solutions] and Jack Henry trailing by quite a distance.”¹⁴

Most recently, FIS acquired SunGard, which at the time was one of the world's leading providers of enterprise banking and capital market solutions. The deal closed in November 2015, giving FIS both expanded and newfound capabilities in providing tech solutions in the capital markets and investment banks. Gary Norcross, CEO of FIS, commented on the deal, stating that he favored “acquisitions that fit two veins: those offering us a new product or service in one of our existing markets, or those that allow us to break into an adjacent market, or in a perfect scenario, both. SunGard was that perfect scenario—it broke us into the asset management space and extended our wealth capabilities.” The deal contributed to FIS's creating a complete and holistic suite of technology solutions for banks and other financial institutions. The SunGard acquisition, along with the strategic acquisitions of Certegy and Metavante, has brought FIS to the scale that they enjoy today as a leading global provider of bank technology.

Not only has FIS been able to grow its business to nearly $9 billion in revenue through strategic acquisitions and mergers, it has also benefited from a plan to foster organic growth from within its organization. FIS focuses on two facets to this plan for growth—growing its base business by keeping clients in step with technological innovation and reinvesting revenue into research and development—which when coupled with its acquisition strategy come together to create an all‐encompassing strategic growth plan.¹⁵

FIS has addressed the first part of this plan, growing its base business, by staying in touch with the rapidly evolving technological world and effectively introducing their clients to potentially disruptive technologies such as blockchain and cloud computing in an effort to give existing clients new capabilities to more efficiently serve their customers. The second part of FIS's plan for organic growth has been implemented through FIS's 6 percent investment of revenue back into the company's research and development department. This investment has funded various centers of research with different focuses in FIS offices around the globe. For example, the FIS office in San Francisco specializes in exploring the ways in which mobile capabilities are impacting banks, offices in New York are exploring how the acquisition of SunGard could shape capital markets in the future, and FIS in Bangalore is extensively studying global financial inclusion. These research hubs will allow FIS to more effectively respond to innovation and disruption in the bank technology industry and grow its business into unchartered territory. While acquisitions and mergers have contributed to the rapid growth of FIS's business, the company's plan for growth from within is set to foster sustained and steady growth in a rapidly evolving technological environment.

In conclusion, FIS has benefited from its positioning itself as a technological partner to banks of all sizes spanning the globe. FIS's equity shares have performed well in the public market over the past five years, outpacing the S&P 500 by nearly 100 basis points in price change.¹⁶ As a FinTech giant, FIS does not have to rely on disrupting the financial services industry to generate scale and revenue as a FinTech startup would, but rather can help banks leverage technological innovations in the financial landscape and provide tech solutions that will help banks grow their business and more efficiently serve their customers.

Jack Henry

Jack Henry & Associates is a financial services technology provider dedicated to “enabling our customers to process financial transactions, automate their businesses and succeed in an increasingly competitive marketplace.”¹⁷ Jack Henry & Associates was founded in 1976 in Monett, Missouri, by Jack Henry and Jerry Hall and has kept its corporate headquarters in Monett since its founding. After bringing in $9,360 in 1977, Jack Henry steadily grew its business before going public in October 1985 with an initial offering of 1.5 million shares on the NASDAQ exchange.

Jack Henry entered the outsourcing business in 1992 and continued to develop bank software and refine its processes through the 1990s, establishing itself as an industry leader in bank technology. In 2000, Jack Henry made its first big acquisition with the purchase of the Symitar brand and its Episys core processor. The company fully immersed itself in the acquisition game in 2004 when it announced an official targeted acquisition strategy. Jack Henry began acquiring companies with clients outside of its traditional core client group, allowing it to expand into financial institutions of varying types and charter sizes.

In 2006, the company officially launched the three distinct brands that operate under the Jack Henry umbrella: JH Banking, Symitar, and Profit Stars. These three brands employ different core competencies from one another and serve various types and sizes of financial institutions. Together, these three brands helped Jack Henry & Associates bring in a reported $1.3 billion in revenue in 2015.

JH Banking evolved out of Jack Henry's original business model of providing banks with software and tech solutions to enable its customers to efficiently and effectively process transactions. JH Banking currently serves around 1,300 mid‐tier banks, which equates to around 20 percent of these banks that have between $1 and $30 billion in assets.¹⁸ The brand offers three distinct core processors that enable banks to execute their business strategies: SilverLake System, CIF 20/20, and Core Director. Furthermore, through constant surveys and questionnaires, JH Banking offers exceptional customer service measures to gain a competitive advantage. This allows JH Banking to refine their processes internally by keeping in touch with their client base, leading to enhanced growth from within the company. The internal growth strategy by providing exceptional customer service has served JH Banking well, as evidenced by its market share in U.S. community, mid‐tier banks.

In its 2000 acquisition of Symitar Systems Inc., Jack Henry gained the second of its three distinct brands. Symitar was founded as a private company in 1984 and operated as such before being acquired by Jack Henry in 2000. At the time of the acquisition, Symitar was, and still is, recognized as an industry leader in core data processing and tech solutions for U.S. credit unions. The advantages and growth opportunities for Jack Henry were twofold in acquiring Symitar. First, Symitar's core offering and platform, Episys, was in high use and demand in credit unions throughout the United States and the acquisition allowed Jack Henry to offer Episys to clients through Symitar. Second, in acquiring Symitar, Jack Henry was able to expand its business into U.S. credit unions, a space in which it had not previously operated. Jack Henry continued to build the Symitar brand in 2002 with the acquisition of CU Solutions Inc. and its Cruise processing system.

With Episys and Cruise in its portfolio of offerings for clients, Symitar has become the recognized leader of tech solutions for U.S. credit unions. Today, Episys is utilized in over 650 U.S. credit unions and 40 percent of U.S. credit unions with assets in excess of $1 billion. Cruise is currently being deployed in 180 small U.S. credit unions.¹⁹ Thus, Jack Henry created and has grown the Symitar brand through strategic targeted acquisitions, as opposed to the organic, in‐house growth that has fueled JH Banking.

The third bank technology brand operating under the Jack Henry & Associates umbrella is ProfitStars, an overall provider of tech solutions for financial institutions of all sizes and types. ProfitStars combines the legacy background enjoyed by Jack Henry with innovative breakthroughs in six performance groups: financial performance, retail delivery, imaging, payment solutions, information security/risk management, and online/mobile.²⁰

ProfitStars can support any core processing system that a bank may utilize, making it an attractive option for many financial institutions. ProfitStars was launched by Jack Henry in 2006 as a result of a series of acquisitions that enhanced the company's capabilities. It was not launched as a standalone company as the result of an acquisition like Symitar, but rather was a conglomeration of FinTech companies Jack Henry had acquired that offered a diverse suite of products and services. Thus, Jack Henry grew its business through ProfitStars with a combination of organic growth and targeted acquisitions. Today, ProfitStars serves more than 10,500 clients nationwide and is recognized as an industry leader in financial services technology.

Jack Henry has clearly benefited from a combination of its targeted acquisition strategy and sustained organic growth from within its organization. Given the strong record of its equity performance and consistently outstanding customer reviews, one can infer that Jack Henry has carved out its niche in the FinTech space as a dependable technology solutions provider.

Key Takeaways

These companies are examples of companies that are focused not on directly competing with banks but rather on providing technology services and solutions that can serve to improve efficiency, profitability, and regulatory compliance of the existing banks. Each company has used a combination of acquisition and organic growth strategies to grow and remain at the forefront of FinTech trends.