Washington Update – Improving Bank-Core Relationships to Help Community Banks Thrive

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By Rob Nichols, ABA President and CEO

While we have over 5,000 banks that compete with each other, the vast majority of those banks rely on just a handful of large technology companies to provide the core processing systems that allow banks to operate every day.

More than any other topic—even more than credit unions!—I hear from bank leaders that their existing relationship with their core processor limits their bank’s ability to innovate and provide the new banking tools customers want and need in the digital era.

For that reason, I convened a banker-led ABA Core Platforms Committee with a mandate to improve the relationship between banks and their core providers. Over the past year, the committee has had direct and productive conversations with executives from four of the major core providers: Fiserv, FIS, Jack Henry and Finastra. The committee members have outlined the primary issues facing banks, including data access, API deployment and contract fairness.

To their credit, the cores have engaged in a healthy dialogue and shared their perspectives—and we have heard from some bankers that their conversations with their core providers have been more productive since the committee began its work. In an effort to formalize that progress, we released the committee’s Principles for Strong Bank-Core Provider Relationship—a set of principles that bankers can use as a starting point for their conversations with core providers—at our annual convention last fall.

Fiserv, FIS, Jack Henry and Finastra also provided the committee with information on how they are addressing data access, APIs and contacts. We released their responses along with our committee’s analysis of them to ABA member banks to help them as they evaluate their core options moving forward.

In January, the committee met with 11 additional cores with products currently in the market and in March with emerging providers whose core solutions will soon be available. While a handful of large companies dominate the marketplace, there is a growing range of choices for community banks, and ABA will provide fact sheets on these additional core providers to help bankers understand their options.

The committee has also developed several other resources to help bankers as they seek to build a more innovation-friendly environment. Some of these are already available—or will be soon—alongside all the resources I’ve already mentioned at aba.com/core.

ABA is not alone in looking at these issues. In recent months, top regulators have talked about the need to ensure community banks can continue to embrace innovation. Last fall, FDIC Chairman Jelena McWilliams said that banks’ “technology service providers must evolve” with consumer expectations. She urged people to “consider a future where next-generation core service providers offer an end-to-end digital banking experience to their partner banks.”

Meanwhile, at the ABA Conference for Community Bankers in February, Federal Reserve Governor Miki Bowman said she is looking at what the Fed can do to increase the transparency of its supervision program for core providers—including “making information that may be useful about our supervision of key service providers available to banks.”

In my ideal world, banks of all sizes are able to offer the modern banking tools today’s marketplace requires, working side-by-side successfully with the core provider of their choice. We know we have made progress toward that goal, but we have more work to do. I’m grateful to Julieann Thurlow, CEO of Reading Cooperative Bank and chair of the Core Platforms Committee, as well as all the committee members for their leadership and insights. The committee’s work will continue, and this remains one of my most important priorities at ABA.

Community banks need to remain on the forefront of financial innovation. Working together, we’ll make sure that happens.


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