Guest Column with John Chamberlin: February 2023

A picture of John Chamberlin, an old man with light brown hair, thin framed glasses, and a blue patterned shirt.

MAGIC HAPPENED

The improbable story of how Arkansas became a global capital of FinTech

John Chamberlin

Past President, Arkansas Academy of Computing

BEFORE WE CALLED them memes, there was a computing cartoon that showed several people looking at a blackboard covered with a complex flowchart. The many boxes and decision points funneled down to one box that preceded the computer’s final output. That box was labeled “Here a miracle occurs.” The

onlookers were dazed by the seeming magic of the machine’s amazing result.

Sometimes in the real world something like magic occasionally does occur. One such story is that of FinTech in Arkansas, in which the late-60s beginnings of multiple Arkansas-based firms led to global impact 20 years later. In this case, the many boxes in the FinTech flowchart represent the work of lots of very talented people.

The first boxes in that chart actually started filling in a decade earlier, in the late 1950s, at the University of Arkansas. Connell Brown* brought the first computer to campus in the Agriculture Division—it was a Bendix G-15 used originally in cattle genetics. Bob Oliver graduated from the business school and, before going on to become an IBM Systems Engineer, assisted in teaching a course on programming IBM wire-board accounting machines. Wray Wilkes acquired an IBM 650 vacuum tube computer; housed in the physics department, it was used for classes on research and programming. These were the roots of academic computing and the start of teaching computing in Arkansas.

The first business application of digital computers in Arkansas happened at about the same time, with an IBM 305 RAMAC installed at Ottenheimer Brothers in Little Rock. The first government use of computers was a Bendix G-15 used for engineering calculations at the U.S. Army Corps of Engineers in Little Rock. These installations, and those that followed, created demand for computer skills.

Bob Oliver soon became the manager of systems engineering at IBM, in charge of hiring. IBM paid well and provided interesting work, which helped Bob hire some of the best engineering and business graduates from the Fayetteville campus.

People IBM hired in the early 1960s included Jim Gattis, Walter Smiley, Hunter Gammill, Alex Dietz, Rodger Kline, Jim Womble, Charles Morgan, and Wally Anderson.

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IN ONE SENSE, banking technology was 70 years old before the advent of digital computers, with calculators, accounting machines, and proof machines supporting banking operations. Bank of America installed the first digital computer in a bank in 1955, a first-generation IBM 702 computer with 10k of memory, supporting consumer loans and central accounting. The IBM 1401, a second-generation transistor computer released in 1959, was the first computer to sell more than 10,000 units. A significant number of early units went to large banks. A study conducted in 1962 by the U.S. Federal Reserve showed that 178 U.S. banks were either using computers—often the IBM 1401—or planning for installation. These banks accounted for 40 percent of the commercial deposits in the country by value.

But there were 13,000 smaller banks just beginning to consider computers. Every bank would need appropriate software and skilled people to program and operate computers, but it was unclear where these resources, both people and programs, would come from. Bank of America could afford investments in training and software development, but smaller banks could not.

IBM wanted to sell more 1400 series machines and, later, the more robust (and complex) 360 series. IBM had two answers to the need for banking software: the first was the “PAL” package of assembly language banking systems, originally developed by IBM personnel for larger banks; the second was IBM Systems Engineers (SEs), who found themselves imbedded in early installations. Each installation usually required significant customization of the PAL package code and significant SE time.

This led to banks hiring IBM employees to run their new computer operations. By the middle 1960s, Walter Smiley oversaw computing at First National Fayetteville and Hunter Gammill had that job at National Bank of Commerce in Pine Bluff. Both were frustrated by the process of converting banks to computer use and the challenges of operations—Walter described the process as “six months of hell.” Walter and Hunter started meeting to discuss cooperative development efforts to produce improvements on the PAL package. Then they realized that perhaps a better approach would be a facilities management company to provide people with skills to run computing for banks. Realizing that such a company would need significant financial backing, they approached Stephens Inc. with the plan.

Previously, on another branch of the flow chart, Jurdon “Bud” Perry had gone to Texas for college in the 1950s and found work at an insurance company that bought an IBM 305 RAMAC and later upgraded to an IBM 1400 series. Bud rented out excess computer time, including to Ross Perot and his startup EDS. During this period, Stephens Inc. was invested in many companies, including Union Life in Little Rock. Union Life hired Bud Perry to run their new computing department. Bud eventually worked with John Jacoby of Stephens on an idea for a service bureau, and banks seemed to be a good market, along with general commercial work. But Stephens hadn’t found a suitable CEO for this new venture. Then they were approached by Walter Smiley and Hunter Gammill, and they knew the search was over.

The result was the founding of Systematics in the fall of 1968, with Walter as CEO. Operations soon ramped up to seven data centers scattered in banks around Arkansas. Plans were in place to hire a development staff and develop new improved banking software. The new Family of Financial Systems, written in COBOL for the IBM S/360 series, began to roll out in 1972. Systematics rapidly expanded outside Arkansas, and by the late 1970s had data centers from coast to coast, and from the Canadian border to the Gulf of Mexico.

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MEANWHILE, ON STILL another flowchart branch, in 1969 Alex Dietz left IBM to lead a data processing subsidiary of Ward Bus Company called Demographics. Headquartered in Conway, Demographics was focused on mailing lists, the root of what is now called “MarTech,” for Marketing Technology. In the early 1970s, Charles Morgan, Rodger Kline, Jim Womble, and Jerry Adams joined the company that would eventually become Acxiom, and Charles became the CEO. Later the management purchased the company from Ward. Over time, banks became a major customer segment. By the mid-1970s, Acxiom was doing national marketing for large clients.

So far, that’s two upstream branches on the chart—that is, startups beginning with local customers and principals who wanted to stay in Arkansas, and who found a path through both the University and IBM.

But there were other paths to FinTech. Eddie Sligh took one of those. He grew up in Prattsville, where as a boy he worked on the Stephens family farm. After high school he worked as a lineman for AP & L (now Entergy) until Eddie McCoy, President of Grant County Bank, offered him a job in operations. Eddie Sligh became the sixth employee of one of the smallest banks anywhere, with $6 million in assets. He eventually became operations manager and worked with the accounting machines the bank used for all applications except savings, which was processed by Simmons Bank in Pine Bluff.

In 1969, Eddie McCoy heard that IBM was showing off a new computer in Little Rock, the System 3, and he sent Eddie Sligh to see it. The bank board subsequently decided to buy one of the first System 3s with an attached check reader, a totally new product. IBM tried to discourage the purchase, both because of the bank’s size and the lack of banking software for the System 3, and because they didn’t want to irritate a large client, Simmons Bank. But Grant County Bank bought the System 3 anyway.

After the purchase, however, they learned that the required software wasn’t included, so Eddie Sligh was directed to write some. Eddie took RPG classes, got help from IBM CE Wally Anderson, and travelled to IBM locations around the U.S. to test the software and hardware. The bank’s president, Eddie McCoy, keyed in most of the code and compiled it. The final version was ready on New Years’ Eve of 1970. Several months later, the Grant County Bank software was installed in a second bank, this one in Philadelphia, Mississippi. Realizing they had a new avenue for sales, IBM created a marketing team for small banks and produced a picture-filled brochure to push the software. Soon Eddie Sligh’s banking software was in dozens of sites around the U.S.

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ON ANOTHER SECTION of the flowchart, we go back to 1964, the year that three members of the Fort Smith Northside High School band—Mike Bennett, Bruce Knox, and John Chamberlin, aka Yours Truly—received their high school diplomas. Mike attended college briefly and then began working in an office where he took a programmer aptitude test and began to program computers. Bruce went to the University of Arkansas, where he got an MBA and then did computer work for Whirlpool. While at the University, Bruce and James Hendren became friends and married sisters. James later received his doctorate in physics from UA and then went to work with the consulting firm SAIC.

As for me, I went to Michigan State University and learned FORTRAN and Linear Programming, knowledge I applied to the development of poultry systems for OK Feeds in Fort Smith during the summers of 1967 and 1968. In 1972, after completing military service and a master’s degree from MIT, I moved to Little Rock to work as a developer at Systematics. In 1975, I started my own company, Arkansas Systems Inc. There I was joined by Mike Bennett, Bruce Knox, James Hendren, and Eugene Jones—Eugene was also a UA physics graduate.

Initially, Arkansas Systems developed custom software for a variety of industries, including agriculture, health, banking, accounting, and distribution; this was on a variety of hardware. But by the end of the 1970s, we had trained our focus on IBM midrange computers and become expert in data communications, partially via a distributed poultry system developed for Banquet Foods and later sold to Ralston Purina of Venezuela. James Hendren became president of Arkansas Systems during this period.

Now all of these flowchart boxes were beginning to converge. In 1977, when IBM introduced the System 34, Eddie Sligh migrated the Grant County Bank software to that platform. He sold some rights to others, while losing control of other copies of the code. Soon multiple vendors, such as Jack Henry and EDS, were selling derivatives to banks across the country. Eddie himself went to work for Systematics for a time, establishing their midrange banking solution. Hundreds of smaller banks were moving their processing in-house, and almost 90 percent used some version of the Grant County Bank package.

But the banks wanted to provide new services, like online teller systems, ATMs, debit cards, and the ability to use the cards they issued in networked ATM and POS situations. Into this opportunity stepped Arkansas Systems, providing online banking solutions on the IBM Systems 34, 36, and 38, as well as their successor, the AS/400. Soon there were hundreds of Arkansas Systems installations in banks across most of the continental United States.

At this point, most of the colleges in Arkansas were offering computer science degrees, and good jobs now awaited graduates of schools like UCA, UALR, Henderson State, UAF, and others—they could actually stay in Arkansas while working on interesting projects across the country. With Arkansas FinTech companies at the top of their categories, you could throw a dart at a U.S. map and likely hit a bank that had turned to Arkansas for software and service solutions.

This grouping of companies provided a great pool of skilled workers and also offered career mobility to them: People moved between the companies. In one example, when Systematics discontinued a product line, they called Arkansas Systems and found a job for the salesman affected. Other Arkansas firms utilized the same talent pool, including Dillard’s and Walmart.

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THERE WAS ONE more step to take, one more big magic box in the flowchart—globalization. In the early 1980s, Acxiom set up offices in the UK, and Arkansas Systems provided solutions to banks in the Caribbean and Latin America. But one Southeast Asia snapshot from the late 1980s proved that the flowchart lines had come together and magic had happened: Acxiom had an office in Singapore, supporting the region. Systematics was installing its first international client in Indonesia. At the same time, Arkansas Systems had people there working on its third Indonesian installation—Arkansans could actually meet up in the hotel and talk about the Razorbacks! And in Malaysia, Arkansas Systems was providing ATM software to a bank that used Grant County Bank software. Other Arkansas firms were also active in the area, including Herb Lair’s Computer Utility of the Ozarks, which had grown into a global provider of cable TV software from its beginnings as a Harrison gas station and appliance store.

In time, Systematics became Alltel Information Systems and then Fidelity Information Systems—FIS. Arkansas Systems became Euronet Software Services. Eddie Sligh re-emerged as CEO of Cardinal Systems, with the Grant County software updated for the Internet era, including image processing of checks. By the late 1990s, FinTech software rooted in Arkansas was operating in more than 70 countries on six continents. When the 20th century ended and software firms prepared to avoid Y2K problems, developers in Little Rock stood by to assist customers in almost every global time zone.

We’re now well into the 21st century, and Euronet Worldwide, FIS, and Acxiom are all large corporations operating today. Cardinal Systems software became the basis for a new company with deep roots, Smiley Technologies, run by Elizabeth Smiley Glasbrenner.

And the Arkansas innovation that began with FinTech continues, now in many other fields. Not only do we have First Orion, a booming second startup involving Charles Morgan and Jim Womble; we also have any number of imaginative new companies popping up all over the state. Today, that old computing cartoon would be streamlined and updated for the IT age: Several extremely young tech professionals gather around a computer monitor on which a complex flowchart beeps and pings. But these tech experts aren’t looking at the computer screen; they’re each eyeing their smartphones. In seconds, they all receive the same text at the same time: Against the outline of the state of Arkansas, this message lights up their screens: “Here magic happens.”

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*The highlighted names represent people inducted into the Arkansas Academy of

Computing.