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Small FIs reluctant to spend on payment tech IT
MADISON, Wis. (2/7/11)--Financial institutions are indicating an improvement in their financial situations, but many still are restrained on their spending for technology, said two technology providers that serve credit unions and banks. They cited general uncertainty over regulatory issues, quality of credit and capital structure as the economy slowly recovers. Officials from Fiserv Inc. based in Brookfield, Wis.,-based and Monett, Mo.-based Jack Henry & Associates both said credit unions and banks are hesitant to commit spending to large IT projects, although they both saw slightly more spending in their last performance reports. "The outlook for predicted IT spending has become slightly more positive over the last quarter, which has helped fuel our pipeline even in light of our strong sales finish to the year," said Jeffery Yabuki, president/CEO of Fiserve Inc., in a conference call Friday about the company's fourth quarter 2010 earnings. "However, clients and prospects remain disciplined in how they deploy their capital, and we believe that the pairing of undefined regulatory landscape with environmental challenges will continue to impact sales cycle," Yabuki added. He noted the "impact of comprehensive changes in the regulatory environment continues to be an unknown" and "the entire industry will change as financial institutions look for new ways to replace earning that are under pressure," according to a transcript of the call. The outlook for 2011 "is based on an assumption that technology spending and the overall environment will be incrementally better than 2010 but still not at the average rate of growth we expect to see over the next three years. We also believe that client spending will again be weighted towards the second half of the year," said Yabuki. Fiserv reported fourth-quarter revenue was up 1.5% to $1.08 billion. Jack Prim, CEO of Jack Henry & Associates, said much the same in that organization's conference call Tuesday on its Fiscal 2011 Second Quarter performance. "We are seeing what appears to be a gradual improvement in spending from our financial institution customers as the economy continues to slowly improve," Prim said, adding the company had another record quarter for revenue, gross profit and net income. For the second quarter of 2011, the revenue for the bank systems and services segment of Jack Henry rose 11% to $189 million from $171 million, with a gross margin of 43% for both periods. Credit union systems and services segment revenue in the second quarter for fiscal 2011 rose 35% to $53.6 million, with a gross margin of 39%. That compares with $39.8 million in revenue with a gross margin of 38% in the second quarter of fiscal year 2010, the company said in a press release. For the six months ended Dec. 31, 2010, the bank systems and services segment revenue rose 15% to $370.9 million from $321.4 million, providing a gross margin of 43% for the current period, compared with 42% a year ago. The credit union systems and services segment revenue increased 49% to $106.6 million for the first half of fiscal 2011 from $71.7 million for the same period a year earlier. The significant increase in credit union segment revenues relates primarily to the acquisitions of PEMCO Technology Services Inc on Oct. 29, 2009, and iPay Technologies Holding Co. LLC on June 4, 2010, said the company.


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