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Small banks that rely on technology providers Fiserv, FIS and Jack Henry & Associates are starting to revolt, arguing the companies are making it more difficult for them to compete against larger banks.
According to a report in The Wall Street Journal citing executives at some of the small banks across the country, the executives argue the technology providers have complicated contracts and digital offerings that are less than stellar, which makes it difficult to compete against the big banks that are rolling out advanced technology to meet the needs of younger consumers. They complain the contracts are too long in length and come with hefty fees. Ending a contract can cost millions of dollars, something the small banks can ill afford.
The executives told The Wall Street Journal they feel they are too reliant on these firms for their technology needs, and as a result are filing lawsuits and tapping FinTechs to get better deals. The paper noted that midsized and local banks account for 13 percent of the primary banking relationships but only get 7 percent of the customers who switch banks. The slower going in offering new technology can hurt the smaller banks’ ability to lure customers looking for an alternative.
“I’ve met with over 3,000 bank CEOs, and this came up time and again: the challenges and constraints they face with their core provider,” said Rob Nichols, chief executive of the American Bankers Association, an industry group that represents large and small banks in the report. Citing research firm Celent, The Wall Street Journal reported the three largest core providers have business with 90 percent of the banks in the U.S. that have under $1 billion in assets. They have become the leaders via consolidation over the years, with FIS and Fiserv making big purchases this year and signaling more acquisitions are coming. To counter that, the American Bankers Association invested in Finxact, a startup that was founded by an executive of one of the core providers.
[“source=pymnts”]
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