Fiserv 2.0 Banks on the Reliability of Power Systems

December 8, 2009 Alex Woodie

The Power Systems platform plays an important role in a number of American industries, including manufacturing, distribution, and entertainment. But you may not know that the platform IBM used to call AS/400 is also a very strong contender in banking. One of IBM’s biggest partners in that field, Fiserv, relies heavily upon the i OS platform to deliver financial services software and services, and considers it a core component of its strategy to evolve banking solutions in the Internet age.

Fiserv has changed tremendously since it was founded 25 years ago from the merger of regional data processing firms in Florida and Wisconsin. Company growth has been fueled primarily through dozens, if not hundreds, of acquisitions, such as the 1995 acquisition of Information Technology Inc. (ITI), which developed a core banking application called Premier that is one of Fiserv’s i OS-based applications (the other being Signature, which was previously developed by its CBS subsidiary).

Perhaps because of all those acquisitions, Fiserv company officials felt the need to redefine the company and its goals. This led to the “Fiserv 2.0” re-branding exercise introduced in February, the consolidation of subsidiaries such as ITI and CBS under the Fiserv name, and the divestiture of operations in areas such as insurance, healthcare, and stock brokerage management that were not directly related to its core mission.

This allowed Fiserv to concentrate on delivering software and services to its primary customers including retail and commercial banks, credit unions, and thrifts of all sizes.

Fiserv 2.0

While it may have seemed a gutsy time to call for a re-branding initiative–considering the trillions of dollars lost in the stock market amid the worst economic downturn in 80 years–the “Fiserv 2.0” mission had actually started many years before, and was solidly grounded in obtaining real-world benefits, explains Mike Young, president of Fiserv’s bank and credit union solutions.

“If you turned the clock back five or six years ago, our model was to have each product out there almost in a Proctor & Gamble kind of way, competing with shelf space on its own,” Young says. “We could have a meeting with a client and literally have four or five business involved, each of which would give the client a different business card, and they didn’t look in any way related to one another.

“In most recent years, beginning with Jeff Yabuki’s tenure as president and CEO of Fiserv, we began the evolution of the company from kind of an acquisition arbitrage model to an operating model [based on] working very hard to build integration synergies in the portfolio of products we have.”

The term “synergy” is often overused in the hype-happy high tech world, but in Fiserv’s case, it’s exactly the right term to explain how it can better market and sell the wide variety of “add-on” solutions to the 6,000 customers that have adopted one of Fiserv’s core account processing platforms running on i OS, AIX, Windows, or zSeries or Unisys Clearpath mainframes.

This list of add-ons is vast, and includes: installing and running ATM networks and printing ATM cards; managing a Visa or MasterCard program; providing online banking and electronic bill-pay options; managing Automated Clearing House (ACH) networks; processing checks and providing check images; remote deposit capture; PositivePay and treasury management solutions; fraud, market, and credit risk solutions; customer and channel management; business intelligence solutions; portfolio and trade management; and electronic bill payment and presentment (EBPP).

The most lucrative add-ons may revolve around electronic billing and Internet banking. Fiserv was already the one of the largest clearing houses for check processing, and thanks to the $4.4 billion acquisition of EBPP vendor CheckFree in 2007–Fiserv’s biggest deal ever–the company became the largest provider of ACH services. It also expanded its customer base by 10,000, and added $1 billion to Fiserv’s 2008 revenues of $4.7 billion.

Fiserv has worked to integrate CheckFree products and services into its core banking platforms, and the work is paying off.

Outsourcing Grows Quickly

Many of the conversations Fiserv has with its customers entail effective use the Internet–particularly mobile banking via smart phones, which is taking the industry by storm. But that doesn’t overshadow outsourcing as another major contributor to Fiserv’s bottom line and technology strategy.

Approximately 55 to 60 percent of Fiserv’s core banking customers rely on Fiserv to run their applications for them, according to Young. That represents a couple of thousand financial services firms that are banking their organizations’ reputations on Fiserv, its extensive investments in data centers and Power Systems technology, and its operational grit.

The truly stunning statistic, though, is that the number of outsourcing customers at Fiserv has expanded by two to three times in the last year alone, according to Young. That represents a huge surge in the application service provider (ASP) business model for Fiserv, which has consistently been voted the number one financial services tech firm in the annual FinTech 100 rankings put together by IDC and American Banker.

Fiserv’s reliance on the Power Systems platform gives it a solid underpinning for making its outsourcing business reputable and profitable, particularly for Premier, its largest and most complete core processing solution, which has about 2,000 customers and was ported from the Unisys mainframe to i5/OS in 2004.

“The one reason clients would come to us is economics and our ability to drive scale,” Young says. “That inherently requires systems that have the ability to scale, and one of the reasons why we selected the Power Systems platform–and I happened to be involved in that decision–was for this very reason. We could literally address, from the smallest environment to the largest environment we had to service, and do it in a cost effective way with the Power Systems platform. There’s just no two ways about it. That was fundamentally important to us.”

Driving SOA Adoption

While Fiserv makes gains in ASP and software as a service (SaaS) delivery models, the company has also embarked upon an aggressive service oriented architecture (SOA) strategy to minimize the impact of new application development–both for itself and its customers, says Jim Sizemore, the CIO of Fiserv’s Banking Solutions group.

“We’re re-examining how data lives in our application and how we can use it to create better customer experiences from that data,” Sizemore says. “The Power Systems [platform] plays into this very nicely. It enables us to make a move more toward XML-based Web service type of messaging that we can use to ‘fossilize’ the event data as it happens, and then re-use it without having to re-ETL it somewhere else in order to re-process it and use it again.”

Once that data is fossilized, it can be pulled up, quickly and cheaply, to perform a range of functions, such as analyzing customer behavior patterns or developing better customer attrition models, which benefit customers.

Sizemore and his team utilize a number of strategic tools in its R&D labs, including: the .NET framework and Web services at the presentation layer; the SonicMQ enterprise service bus (ESB) from Progress Software (its starting to use WebSphere and WebMethods middleware, he says); and .NET, COBOL, DB2, and more Progress tools on the transaction and database layers.

As part of its SOA strategy, Fiserv is using the n-tier distributed approach to break monolithic applications into user interface, middleware, and database/transaction components. “The benefit to the bank is it enables us to easily adapt the database and process management from the Unisys platform to the Power Systems platform, without changing the end client experience at all,” Sizemore says.

While SOA and Web services necessitate a lot of TLAs (three-letter acronyms), Fiserv’s customers don’t really care about the technology, as long as it works. “I can talk about it all day long, but customers don’t really focus on that as much as ‘How do I create a better customer experience?'” Sizemore says. “We want our client to know more about the customer before they start a transaction. In order to do that, I’ve got to have an architectural technology vision that enables everything to be transparently orchestrated together.”

The SOA strategy is crucial for Fiserv, as it allows customers to upgrade applications or adapt “add-ons” without significantly disturbing their existing environments. “We can make changes to the database and update the core processing without disrupting tellers and loan officers and Internet and mobile banking,” he says. “It also enables us to introduce newer channels faster to market, without having to go back and rebuild the database every time.”

Banking is traditionally a conservative business, but the pace of technological change is having a dramatic affect on the services that banks offer, and how they interact with customers. For example, in the future, banks will identify and authenticate customers using biometric technology before they can even say “hello;” banking software will resemble Web 2.0 social networking Web sites; and analytics will be constantly pushed out to decision makers as a central component of applications, instead of confined to periodic reports, Sizemore says.

Fiserv’s goal is to stay one step ahead of the curve, and ease the adoption to new technology for its customers, as a sort of an insurance policy against change. “Banks understand the benefits we provide,” Young says. “They don’t necessary understand how we do it.”