Every banker has to make decisions about technology purchases. But a core vendor and information technology (IT) oligopoly has emerged, leaving very few vendors to choose from, and the costs of new services and fees for early termination are increasing exponentially.
Struggling under the oppressive weight of the core vendor goliaths—with FIS, Fiserv and Jack Henry & Associates now controlling upwards of 85 percent of the market—and shackled by contracts that last five, seven and 10 years or longer, community banks and credit unions have been unable to develop and deploy the same cutting-edge, customer-facing services as those produced by larger national banks, and have been forced to pay more and more, while receiving less and less competitive functionality.
But after decades of injustice, community banks and credit unions are now rallying together as part of the Golden Contract Coalition (GCC), to bring an offensive response to the current era of underperforming IT functionality, unenforceable service-level agreements, unfavorable contract terms and overpriced, one-sided deals.
“Today’s savvy consumer has high expectations regarding the products and services they receive from their bank. The structure of core providers slows the adoption of new products for community banks, which ultimately impacts consumer choice and may force consumers into a banking relationship where they will pay higher fees,” said Carl A. Kessler III, chief information officer of First Federal Lakewood, a mutual based in Lakewood, Ohio. “The Golden Contract Coalition has the real opportunity to be a disruptor—helping to empower community banks to meet consumer demands, and allowing consumers to maintain the local banking relationship they value most.”
An alliance of community banks, credit unions and key players from within the banking community, the GCC is charged with addressing core vendor contract disparities from one institution to another, and aims to level the negotiation playing field by creating a fair, standard, right-sized agreement between community financial institutions and their core and IT vendors—exclusively available to its members.
Backed by Pillsbury Winthrop Shaw Pittman LLP, the leading IT contract negotiation law firm in the world, the GCC aggregates expert negotiators, champions of competitive banking and the institutions themselves to implement higher standards of service and more equitable terms.
“The vendors and the banks need each other, but there has to be a fair balance established. We are trying to achieve this through the creation of the Golden Contract,” said Pillsbury Senior Partner Robert Zahler.
By stripping the excessive legalese and self-serving conditions from core and IT agreements and pricing, and dictating the master commercial terms and legal conditions by which all core and IT providers must abide, the Golden Contract is able to manufacture unprecedented levels of leverage by pooling the combined contract value found in large groups of community banks and credit unions. With more than 40 members already on board, these collective bargaining methods equip smaller institutions with the same negotiating power as the large, national and multi-national banks, allowing them to pass on cost-saving benefits to their shareholders and to consumers.
The fact is, we are fighting for fairness and equity. Whether the oligopoly knows it or not, the industry is unhappy with the quality of the products, services and value they are currently buying, and there is an alarming suspicion that bankers are being taken advantage of economically. It’s time to change the game, once and for all.