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JACKSONVILLE, Fla. – Imagine being Hugh Butler for a moment. That would mean imagining you’re an entrepreneur who founded a credit union data processing company over 20 years ago. You run the show at a firm that very quietly built up a client base of over 600 credit unions. Then imagine making the emotional decision to finally sell the company to a bigger player in order to get more investment dollars for a core system that you truly believe can innovate credit union core processing. Butler did that back in 2003 when he sold Computer Consultants to Aurum Technology, but what happened next was out of his hands. Aurum then turned around and made a deal to be acquired by Fidelity National, a huge $7 billion Fortune 500 company that had zero presence in the credit union data processing space. “We were doing all the payroll and HR conversion work to Aurum and then bang, bang we’re sold to Fidelity. There were just nine or 10 months between the two deals,” said Butler. So again Butler and his crew had to begin more HR changes and dealing with the other stressful processes that come with being bought. Fast forward to today and Butler says it was more than worth it. The deal between Fidelity and Aurum only closed in the first quarter of ’04, but already a lot has happened. Computer Consultants has moved into hip new offices in downtown Salt Lake City. “It was home to one of the last failed dot-coms. There was really wild Herman Miller office furniture in it. They said if we bought the space, we got the furniture,” said Santo Cannone, SVP of Fidelity’s Integrated Financial Services division. Cannone was an executive at Aurum at the time Fidelity purchased it. Hip furniture or a new office isn’t any major business achievement, but it’s sort of symbolic of a new era for Butler and his team of 40 or so employees operating the Mercury product. “We estimate we’ve had approximately a half a million to a million dollars invested in Mercury since being bought,” said Butler, who is now an EVP with Fidelity. The influx of investment dollars is exactly what Butler envisioned to bring Mercury to the next level, which is where Cannone sees it going. “I’ve never seen a better user face. Architecturally the product is just outstanding,” said Cannone, who with over 20 years of credit union core processing experience (much of it with the former EDS CU unit), says Mercury’s ease of use keeps surprising him. So much so Fidelity is now working to move Mercury up market to larger credit unions, something Butler and his crew has never really focused on. Mercury is all about Microsoft, but it’s not just Windows-based as other processors’, says Butler. Mercury strictly adheres to Microsoft standards and specifications. It is optimized for Microsoft Windows 2000. “The biggest challenge was to knuckle down and learn the Microsoft way. It makes for very disciplined applications,” said Butler. Cannone said one way to see how flexible and adaptable Mercury has become is the rapid pace at which Fidelity is converting CUs off Computer Consultants’ old DOS-based Director product to Mercury. Fidelity is doing about 20 conversions a month and has already converted more than 250 CUs, with another 240 to go. Butler says with so many high-quality third-party tech vendors out there, today’s credit union data processors are clearly at the beckon call of credit unions. “The biggest thing that credit unions want is fast turnaround, rapid development. They don’t like us to say no. They want to pick a best of breed solution that fits them. If they want Digital Insight, the system has to give it to them.” Butler credits not only the Microsoft ubiquity for Mercury’s flexibility, but also an integration product from qbt. qbt has been gaining traction in the credit union industry with its MutliPoint Integrator, a real-time multi-point box that provides connectivity to a variety of best of breed products. In just the last year PSCU Financial Services, San Diego County CU, Kern Schools CU and credit union data processors Share One and EPL have all added qbt’s MutliPoint Integrator. Assuming that CUs that use Mercury are small, vanilla credit unions would be a mistake. Take the $59 million Mennonite Financial FCU in Pennsylvania. The credit union has a very sophisticated business lending and real estate lending operation. Of its $52 million loan portfolio, approximately $6 million is in MBLs, while it has another $3 million business loans that are below the $50,000 minimum to be counted against its 12.25% MBL cap. It’s also participated off some MBLs to keep meeting members needs. Larry Miller, CEO of the CU and a former banker, says the new Mercury system’s use of SQL has helped the CU add on specialized real estate and business lending applications very easily. “I like the fact that it’s running on sequel server, all the other programs we’re buying seem to be using that same technology. We just added document imaging and are using some separate real estate software that are all very compatible with Mercury,” said Miller. Miller said the system has been so smooth, there’s no need for any in-house IT staffers. “On the back office side, it just runs and runs on the Windows operating system. We used to have a lot of conflicts (with the DOS system),” said Miller. On the real estate side, the system handles the CU’s complex HELOC loans. The CU has differential pricing on all its HELOC loans. Miller’s CU grew 25% last year and he expects that to continue. “We think this system can handle our growth for at least the next five to ten years,” said Miller. Cannone says Fidelity can probably add on the functionality to bring Mercury up market very quickly, but it’s taking a measured approach. Fidelity can afford to do that because it has MISER to meet the needs of larger CUs. MISER is the former core system from Aurum. MISER in some ways is the polar opposite of Mercury. MISER’s selling point is its mortgages and commercial lending functionality, says Cannone. “This is a product that runs thrifts, savings banks, commercial banks and credit unions. We have a proven track record with mortgage functionality and commercial functionality,” says Cannone, and that is appealing to CUs getting more active in these two areas that commercial banks have done for years. MISER’s CU clients range from $200 million to $3 billion. Cannone likes where FIS sits in the credit union industry with MISER and Mercury covering all sizes of CUs. And the considerable resources of Fidelity don’t hurt either. “Now that we’re (Aurum) part of Fidelity we had a chance to go rummaging in the attic and we’ve come up with some really interesting stuff,” said Cannone. Interesting stuff to him means add-on applications for Mercury and MISER, like Fidelity’s profitability management solutions which are coming available to credit unions. Cannone says that is just one example of how Fidelity’s girth can help credit unions. Cannone says unlike Fiserv, Fidelity plans on putting all its energy into just two credit union systems. “We’re not going to diffuse our solutions over many products,” he said. Fidelity has taken plenty of jabs at Fiserv’s multiple product approach. Fidelity also markets by product brand, not by subsidiary or division name like other major processors. It is trying to build up the Fidelity name in the credit union industry, with the MISER and Mercury brands also visible. Fidelity National has gone through an incredible transformation in a short period of time. For years, Fidelity’s core business has come from the mortgage industry. It is the nation’s largest title insurance company and provides mortgage-related products such as escrow, property valuations and appraisals, default management, relocation services, flood, homeowners home warranty insurance, multiple listing services software, and others. But things changed when it started acquiring core processors for banks and credit unions. It spent a billion dollars acquiring Alltel and almost $200 million for Sanchez, two strong bank processors. The Aurum deal cost it $300 million. Because of its growing presence in core processing and other financial institution products, it created Fidelity Information Services, Inc. (which is where Mercury and MISER fall under). FIS was instantly one of the top banking processors and was gaining fast on CU processing companies. Fidelity planned to spin off FIS into a separate company, but that plan fell through this year, largely because of another major acquisition, InterCept. Fidelity bought them for a deal worth over $400 million. Intercept is a banking solution provider for over 400 community banks. Fidelity later said it needed to focus on the InterCept acquisition and had shelved its plan to spin off FIS. It also cited concerns about the market and the new stock for a second company. More recently a Texas investment firm made a significant investment in Fidelity which has changed things. Cannone said FIS not being spun off has no effect on what it’s doing. “To us it’s a non-event,” he said, citing on its own FIS would have been roughly a $2.5 billion company as opposed to $7 billion, so either way it would have had a lot of resources to draw from. He notes that FIS considers OSI and Symitar as the biggest competitors in the CU DP space. “I think credit unions are in a great place now, and we’re trying to uniquely position ourselves,” said Cannone. [email protected]

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