The core of the matter

When TBA’s Future of Banking Task Force began meeting last year, redefining the bank-core provider relationship quickly emerged as a key issue for this group of Texas community bankers.

The bank-core relationship is fundamental to meeting the needs of bank customers and this requires strong collaboration in a rapidly evolving and ultra-competitive marketplace.

Many banks are happy with their cores and have sound relationships. But our Future of Banking Task Force found that there is significant frustration from others who tell us the bank-core relationship has become unbalanced. Perhaps, it is because the “Big Three” core providers — Jack Henry, FIS and Fiserve — are imbedded in approximately 90% of the banks across the nation. This has worked well for them financially.

But bank customer needs have evolved. Community banks have sought to introduce innovative technologies and to utilize data in new ways in service to their customers. But in many cases, they have found that core business relationships and agreements are distinctly 20th century in a 21st century operating environment.

Lack of Open APIs, rising fees for banks to utilize and manage their own data and inflexible contracts were key issues our Future of Banking Task Force identified as major challenges. No bank desires to make a core conversion. It is a disruptive and expensive process, so working with the cores to address these issues was our first approach. In April of this year, at the direction of our task force, TBA sent a letter to the Big Three cores requesting a positive dialogue. Jack Henry responded immediately and designated a point of contact.

Then, in May, FIS imposed cybersecurity “surcharges” on some Texas community banks. Cybersecurity is critically important to community banks. But distributed as a “notice,” this mid-agreement, unilateral invoice surprise exemplified some of the bank-core imbalances identified by our task force.

TBA and IBAT sent a joint industry letter, which led to a productive conversation with FIS and the suspension of these surcharges for Texas banks. It was a win for Texas community banks. But this situation was unnecessary. It made clear that work remains to be done to ensure that core relationships are fairer, that they emphasize communication and that they recognize that the bank is the customer.

Each of the Big Three has now responded to our invitation to engage our Future of Banking Task Force on these issues and to work collaboratively to address them. We look forward to a positive dialogue in the coming weeks. And I am confident we will find solutions. If not, there are a number of other core providers and emerging firms that are flexible, communicative and responsive to our community banks.

When bank-core relationships are balanced, true collaboration can occur. This will be good for the cores and our banks into the future. And, most importantly, it will be good for the customers our banks serve.