Acquisition brings modernized operational systems to community banks

Roughly every five years, the Community Bank of Lena, Ill., has reexamined its relationship with its core provider by looking at available functions, customer service, and cost. The $287 million bank, which operates four branches in the upper left corner of the state, had signed on with Modern Banking Systems in 1987, and that company’s history and customer service gave the Ralston, Neb.-based provider an edge. .“What we really liked was the family atmosphere,” said Valerie Dunlavey, VP/loan officer. “When you called in, you got a live person and your problem or question was likely to get answered within an hour.” Service was the company’s best feature, Dunlavey said. That, and cost. For a rural community bank with limited resources, a smaller core provider was a better fit for the bank’s budget — better than any of the Big Three (Fiserv, FIS, Jack Henry) that dominate the market.Increasingly, though, Modern Banking Systems product offerings — or enhancements as Dunlavey labeled them — lagged behind others available in the market. In recent years, as she inquired about this feature or that feature, the likelihood that it was available or could be provided with the next iteration waned. In recent years, some customers wondered if cost advantages might cost them their competitiveness, and joked privately that Modern Banking Systems might need air quotes around its name.Modern Banking Systems had been losing customers due to industry contraction, admitted Russell Taylor, president of Finovifi, which acquired MBS earlier this year. “Mergers and acquisitions were happening, but also they weren't selling much,” Taylor said. “We knew their customer base was shrinking. We weren't seeing any innovation in their technology.”And MBS’s owner was, as Taylor put it, “getting on.”As Finovifi considered acquiring MBS, Taylor’s team spoke to customers who’d recently left MBS, people who told them they were concerned about the technology not heading in the right direction. No bank wanted to be “the last one standing on that technology,” he explained, even though they loved the company and relished the customer service..“We thought, ‘well, we are really good at technology,’” Taylor explained. “We understand what banks need. If we buy this organization that has been in the market for a long time and has got great customer relationships, is that something we can grab and build on?” Their consensus was “yes” — and a deal was made.Filling a market needThough it didn’t have widespread brand recognition going into its February 2025 acquisition of Modern Banking Systems and its sole remaining distributor, Modern Banking Systems of Alabama, Finovifi had been making a name for itself in the areas of fraud prevention under the moniker of ThreatAdvice. At first it specialized in fraud prevention and cybersecurity solutions, later adding compliance automation and risk management solutions. The company rebranded in 2024 to Finovifi, an amalgamation of critical concepts (the first “fi” in its name represents “financial services”, the “novi” reflects its focus on “innovation,” and the final “fi” represents “fidelity”).Its principals had built plenty of industry credibility in the fintech space. CEO David Brasfield and Taylor, a native of South Africa, had been serial entrepreneurs operating within each other’s orbits.Taylor said Finovifi’s interest in Modern Banking Systems stemmed from its desire to modernize a trusted core platform and fuse it with advanced fraud defenses and adaptive payments capabilities. They didn’t just want to offer the industry another choice of core. They intended to offer sort of a core-plus: core plus fraud prevention, plus digital banking, plus BSA, plus MLA … in other words, “a single-vendor, composable solution that improves operational efficiency, strengthens data integrity, and delivers customer-centric solutions designed to benefit our clients and their customers,” Taylor explained. Their vision aligns with broader industry trends that encourage banks “to develop an end-to-end fraud strategy optimized across the full ecosystem,” as described in an article published in 2022 by McKinsey & Company. Banks need to engage the core to stem the rising tide of transaction fraud that is increasingly costly for financial institutions. According to Deloitte, a composable architecture enables scalability, cost-effectiveness, and fills an institution’s need to de-duplicate functions. “For example, there should be one deposit and lending ledger regardless of financial products rather than having many overlapping core systems,” the June 2025 Deloitte article explains.And of course, the goal needs to be stemming the rising tide of fraud incidences. Data pulled from the Federal Trade Commission and the FBI, reported by McKinsey, tell us that in 2021, fraud losses in the United States rose to $5.9 billion, and internet crime losses soared to $6.9 billion – increases of approximately 436 percent and 392 percent respectively, compared with 2017.Fraud affects a customer’s trust in their financial institution and their willingness to utilize its services. “The rise of instant payment networks like FedNow and RTP has ushered in tremendous opportunity — but also expanded surface area for fraud,” Taylor explained.Why buy MBS?Modern Banking Systems came into existence in the mid-1970s, selling in-house computing systems to community banks. Initially the company, led by Dan Cronin, only offered in-house computing, a turnkey system with hardware and software, which appealed to the independent community banker who wanted total control over data processing. Community Bank of Lena signed onto that model in 1987. The company grew and developed affiliates across the country to meet market demand; consider them licensees. Modern Banking Systems of Alabama was one of those affiliates, said its former president Russ Smith, who now heads up the MBS business under the Finovifi corporate umbrella. MBS of Alabama was the last of the affiliates standing as new business from MBS waned.Toward the start of the new millennium, MBS turned its focus to converting its 300-some customers away from in-house systems to a service bureau model. Though it was a paradigm shift that required the company to do some convincing in the field, Smith called it the “smart thing to do,” as banks faced difficulty hiring and retaining tech talent while customers expected increasingly complex digital banking solutions. .Dunlavey was involved in the decision at her bank to switch to a service bureau model in 2018. “We were nervous about it, of course, but then once we got on board, it was a great feature for us,” she said.By this time, Dan Cronin’s son, Mike, was leading MBS. As the company’s second-gen leadership aged, and with the task of converting customers to the service bureau model continued, acquisition of new business lagged. It was Smith who brought Cronin, Brasfield and Taylor together. Inadvertently.Smith, with four decades in the business, had engaged a receptive Cronin on the idea of MBS taking over its affiliate. When Cronin visited to see first-hand how a Finovifi fraud product was working at an Alabama bank, Smith introduced him to David Brasfield. After the meeting, Brasfield called Smith to ask if he thought Cronin would be interested in selling. He also asked Smith if he was interested in selling. “Everything was just like perfect timing,” Smith said, who’d known Brasfield since the 1990s. “It fell right into where we needed to fall, and Mike Cronin definitely wanted to let the company go.”Smith said he and Cronin “saw the need of growing the company from inside out, offering more solutions … the idea that we're not just a core sitting out here that you can run, and it's a good core, but coming in with a complete banking package to where we can offer, through our data center, not only all the fraud solutions you may need, but digital banking, a teller platform, everything in a more cost competitive edge that we've ever been able to offer to community banks.”The tech perspectiveThe core leadership at Finovifi, which is also based in Alabama, was very familiar with the MBS core and with working with smaller institutions to integrate products they’d work on in the past, said Terry Ray, chief technology officer. The tech team was less interested in understanding what didn’t happen in the past; instead it took a hard look at how the product presented to customers. “I got pulled into some of the user interface visualizations, and some of the things that we wanted to try around analytics, Ray said. What he discovered was that the products provided the data, but it wasn’t “presented in the most ideal or compelling way,” he said. In his world, he considered that “low-hanging fruit.”The company’s development efforts are focused on building a “cohesive ecosystem” building on Essentia, which is the MBS core product, and then having a bank be able to integrate fraud products as optional add-ons. “All of our products support the single sign-on technology,” Ray said. “So the idea is that we can have a more cohesive user experience and still maintain the same level of security. Those are the types of things that we're looking at and working on that are on the roadmaps … to best understand all the data from that we can get, what other data we might want, and how that fits into what we're looking at on the fraud side, on the AML side as well.”.The company is also investing in an education platform that accompanies its products so employees can get the most out of the bank’s investment. “It's a learning management system that's web-based that tracks employee classes and scores,” Ray explained. The curriculum is used by Finovifi employees and is made available to bank customers also. “People coming on our fraud platforms are getting eight or 10 classes around fraud and what to look for and patterns,” Ray said.Ray said the acquisition hasn’t been a win just for the team and the clients of MBS. The Finovifi team has also benefited. Bringing MBS on, we're able to leverage their team and just let them absorb us into their processes that they already had,” Ray said. “They're already so highly-regulated and so carefully monitored that we can feel good about the things that they're doing, the practices that they have, and just being pulled into that existing ecosystem. “For me, looking at it from a technical standpoint, just being able to leverage what I consider a very good services organization for us internally and for our customers was great,” Ray said.Putting it all togetherWhen considering the acquisition of MBS and its affiliate, Taylor said he and his team knew that for the deal to work, it had to be about more than acquiring a core. They were looking to increase a bank’s wallet share. The core. Fraud coverage. Compliance. All of it automated and integrated. We can be doing your digital banking for you, we can be doing your fraud, your AML, your BSA, all the various things that a bank is spending money on, as opposed to us just being one vendor, having core,” Taylor said. “If we can participate in each one of those sectors, and we either do that because we're building our own products, we've built these before, or we're doing acquisitions or we're partnering with people, then what happens is this sector of the market becomes a lot more viable, and we can be a one-stop shop to the customers.”Finovifi has set out to eliminate a bank’s need to work with 15 different vendors. “But importantly, we're building a business that's high touch,” Taylor said. That’s the influence that comes courtesy of the folks who spent their days working for Modern Banking Systems.To bolster enthusiasm for the deal amongst potential customers, Finovifi invited key MBS employees to come out of retirement and join the invigorated company, including Bob Neville, whose name had been synonymous with Modern Banking Systems since the late 1980s.“One of the big messages we've said to the customers on the user group is, “Tell us where your pain point is. Where are you hurting? And we will do something about that because we've got a development team,” Taylor said, making a point of steering clear of offshore development. “We're doing development with local [people] who have been in the market for a long time … they understand banking really well,” Taylor said he told customers. That dialogue was really helpful. “Being responsive to what the market, to what customers want, is probably the key.”With fraud continuously on the rise, having the fraud products integrated into the core puts the company at an advantage. Ray said it’s gratifying to look at the company’s FraudSentry product and see, month-by-month, how much fraud each bank is intercepting. “That’s a nice, rewarding way to see that you're doing something, when you're seeing hundreds of thousands of dollars in fraud get prevented every month,” Ray said..In the spring of this year, Dunlavey traveled to Nebraska as Finovifi hosted a conference to introduce its products to MBS customers and share what was on the horizon. “We’ve already signed on with fraud products,” Dunlavey said. “We have the ComplyPilot, are looking at RiskPilot, looking at an internet banking product and have had a demo,” she said. “Right now we are on the FraudXchange, which monitors the dark web. It’s kind of overwhelming,” Dunlavey said. “They are building our information for the FraudSentry product. I believe that will be more extensive. It will be 30-60 days. “We are just very excited that they have these resources available,” Dunlavey said. “Especially the fraud.”