Opinion

With core providers, breaking up can be hard

Aaron Silva is president of Paladin fs, a research firm that gathers data on core services (and other fintech products) and provides a resource for banks looking to comparison shop. Silva calls Paladin’s data a “blue book” for fintech services. This information, among other things, helps banks determine whether breaking a contract with a core provider is financially feasible, which is an increasingly common scenario, Silva told BankBeat.

Q: What are common issues banks are facing when it comes to core service providers?

Aaron Silva: They are learning the core suppliers are not financially guaranteeing any of their system’s performance. For example, if there is a failure, or something happens that causes the bank harm, they can’t go back to their contract and find a credit or some sort of benefit. They will find they have to beg for it — or sue them. Another issue we see is the bank’s rights around termination of the contract. Today these contracts are written as such that if you leave a certain service for any reason — or even a part of the service — you have to pay the entire balance of your contract, anywhere from 50 to 100 percent of it. [Continue]

Beware the dreaded ‘deconversion fee’

Making sure you have the best technology solutions in place for your community bank is tough enough.  Making a change in order to save your bank money or to obtain better service should be an option open to every bank. For this reason, you want to make sure you never accept a vendor contract which imposes a large “deconversion fee” on your bank.  [Continue]