Fiserv, Fidelity (FIS), and Jack Henry & Associates (JHA) control 85 percent of the core IT services processing for banks with less than $1B in assets and 93% of the market for those above. By any definition, they possess a market oligopoly.
For decades, they've swung that weight around at the bargaining table, negotiating rotten deals with unwitting community banks and credit unions while simultaneously stunting these financial institutions' potential for growth by limiting access to innovative, more competitive technology offered by a new wave of friendly fintech suppliers.
Alone, community banks and credit unions entering contract negotiations with core IT suppliers are practically powerless because they aren't privy to the terms and conditions core IT suppliers offer other financial institutions of similar size and solution set. Bank executives are left to guess what seems fair and priced right. Even with the help of an expert negotiator like Paladin fs, a major portion of master contract and business terms remain chiseled in stone because of decades of automatic acceptance by thousands of banks.
The Golden Contract Coalition was formed to give community banks and credit unions the strength in numbers they need to stand a chance of changing these immutable terms. After decades of hitting a brick wall while trying to renegotiate these line items, numerous banks realize their only hope of securing balanced, pro-buyer terms lies in banding together. As a result, banks from all over the country are joining the Golden Contract Coalition in an effort to generate real leverage to change the game — and level the playing field once and for all.
When a Legion of Institutions Speaks with One Voice, Suppliers Are Forced to Listen
While each supplier claims they’re fair and willing to make ‘tweaks and changes’ to master contracts and pricing, a self-serving myopic view prevents them from understanding how the lack of technological innovation, absence of SLAs and forced exclusivity clauses are killing the banks they claim to be serving. Long, painful contract negotiations conflate the issue, and at the end of the day, banks and credit unions accept unnecessary franchise risk left embedded within these contracts when they choose to go it alone during core IT supplier contract renewal negotiations.
Banks and credit unions can solve these problems much more effectively as a group because there is power in numbers. Together, they can leverage bargaining power to secure more equitable core IT contracts and a more equitable starting position in every negotiation across the entire industry, with all parties involved saving money and time — a win-win for both banks and suppliers. And, with the transparency of everyone’s cards on the table, trusted partnerships are built and sustained for the long term.
One Contract to Rule Them All
In 2016, Paladin fs engaged the law firm of Pillsbury Winthrop Shaw Pittmanto create a standardized, contemporary and fair ‘Golden Contract’ for community banks and credit unions that mimic the IT outsource agreements outside of this industry, giving rise to a powerful alliance of banks and credit unions called the Golden Contract Coalition. Members will ultimately enjoy the abolishment of excessive legalese and self-serving conditions from core IT agreements, which will in turn lower vendor risk, increase competitive options and hold suppliers accountable to perform or perish.
The Golden Contract is a customizable, yet commercially balanced, template for financial institutions and core IT suppliers that incorporates the basic needs and benefits that today's legacy contracts are sorely lacking. These include such necessities as measurable SLAs, an option for exit in case of M&A that isn't egregiously in favor of suppliers, and provisions for adopting innovative fintech solutions cost-effectively if the suppliers' solution is either substandard or nonexistent.
The Golden Contract can be easily modified to fit the needs of any individual financial institution. Because it will begin any negotiation on an even playing field and therefore will slash many hours of negotiation time for all parties involved. And though core IT suppliers may not yet realize it, they stand to benefit from the Golden Contract as much as the community banks and credit unions it was designed to serve.
When Local Banks and Credit Unions Succeed, the Entire Industry Wins
The Golden Contract is the foundation for creating a relationship between financial institutions and core IT suppliers that is sustainable, and that empowers both parties to thrive in the age of increasingly innovating financial technology.
The irony of the way the current system works is that core IT suppliers are effectively shooting themselves in the foot by not offering fair terms to community banks and credit unions. By providing wholly unenforceable SLAs, making mergers and acquisitions prohibitively expensive, and blocking financial institutions from acquiring the latest fintech by making it completely unaffordable, they're torpedoing community financial institutions' ability to compete. And without that competitive edge, these institutions will not survive with the times — meaning core IT suppliers will ultimately lose a significant portion of their client base.
Ready to Go for Gold?
Simple, fair and universal terms strengthen the entire financial ecosystem. By eliminating distress previously caused by unfair contracts and business models, Golden Contract Coalition members are more profitable and suppliers earn happy, long-term clients.
Contact us to learn more about how your community bank or credit union can benefit by joining the Golden Contract Coalition.