Paladin Blog

The Writing's on the Wall - In Disappearing Ink

Attention, community bankers! The tectonic plates of banking technology are shifting, and if you're not paying attention, you might just find yourself doing an impromptu dance on the San Andreas Fault of financial services. The latest tremor? Our friends at the Big Three - Fiserv, FIS, and Jack Henry - are starting to play a high-stakes game of Jenga with their services, and guess who's left holding their breath as the tower teeters? That's right, it's you, the community banks and credit unions.

Fiserv has decided to kick off this party by beginning to ask their clients to ride into the sunset without Retail Online Banking (ROB) and Business Online Banking (BOB) services after December 2026. If you think that's a problem for future-you, think again. In the glacial world of core banking systems, 2026 is practically next Tuesday.

How much am I overpaying for core, IT, and fintech services? 

It’s the most frequent question we’ve received since we started helping community banks and credit unions fight back against unfair vendor agreements over fourteen years ago. 

Naturally, it’s a fair question to ask, but it’s impossible to provide a simple answer to such a complex financial question. Core banking agreements and fintech vendor contracts have so many nuances that it’s impossible to pinpoint the “right” price to pay for these services without hiring an expert armed with market intelligence to analyze your contract — there are just too many factors at play.

I have recently been enjoying this classic TV show with my 10-year-old son. 151 more episodes to go! He is enjoying a classic show his grandparents watched at the same age, but he does not bank with a financial institution running COBOL (Common Business-Oriented Language). Some things stand the test of time. Your core processor running COBOL will not.

The pandemic of 2020 has been a major business disruption and distraction to the community banking industry - and all industries globally for that matter.   Albert Einstein was famously quoted, "In the midst of every crisis lies great opportunity."   This fact is not lost on  the legacy Core & IT suppliers Fiserv, FIS and Jack Henry as they have recently blanketed their current clients with pre-emptive and unsolicited contract renewals years ahead of their maturity dates.   These "Pandemic Deals" as they are being referred to, are finding bankers flat-footed and making many to feel cornered into a long-term, multi-million dollar decision at a great time of uncertainty and when their collective minds are on so many other pressing matters.  Bankers that have contacted Paladin feel these offers are intimidating as some vendors tease "take -it-now-or-leave-it" deals that feel more like a strong-arm tactic than a partnership hug.

Three sales reps from Fiserv, FIS and Jack Henry walk into a bar one night and belly up to the counter. The bartender says, "What would you three gentlemen like?"  In unison they all answered, "A banker with less than 12 months on his contract willing to negotiate alone!"

Earlier this year FIS announced the groundbreaking innovation of a "Simple Contract" (now renamed FIS ClearEdge) that delivers a, "...simplified pricing and contracting model for qualifying U.S. community banks and credit unions that [enables them] to bring innovative new products and services to market more quickly, control expenses, and maximize the efficiency and resiliency of their operations – better positioning them for success as the economy recovers from the current health crisis."

How does a $2B mutual bank in a small Massachusetts community find a way to drop more than $4.4 million in cash to their bottomline without changing a single IT supplier or interrupting one of their online customers?

Simple. Beginning in 2014 they took the long-game view and intelligent approach to negotiating against their very powerful core IT suppliers and critical technology vendors. BayCoast Bank is run by Nick Christ and was recently awarded the prestigious ICBA National Community Bank Service Award, Grand National Winner, but Mr. Christ has a secret weapon within his ranks - Dan DeCosta their Chief Information Officer. Mr. DeCosta is as friendly as any banker has been created but inside he is a shrewd technologist and businessman that knows how to leverage the power of outside expertise, market intelligence and pricing data with the patience of a tortoise prepared to ultimately beat any other hare.

Excessive fees create a manufactured barrier to acquiring competitive technology that would help the banking industry survive and flourish. This is an unfair business practice at any measure and may not be legal in many states.

The experts agree. Artificial intelligence (AI), the process of machine learning, is exploding and we’re just getting started. According to Gartner Research, AI is the number one strategic technology trend in 2018. The American Bankers Association says AI is one of the top five fintech trends that will drive the next decade of banking.

The vast majority of middle-market community banks and credit unions will at some point explore acquiring or being acquired because M&As are one of the quickest and most effective ways a bank can scale up, expand reach, and grow. Unfortunately, many of these banks have no choice but to watch lucrative M&A opportunities pass them by because they unwittingly agreed to grossly unfair and inequitable terms in their core and IT contracts.