Survey Says!

 

Recently, two surveys have been published that have confirmed my suspicions that a significant portion of community bankers are not at all satisfied with their current technology vendors.

I have been frequently engaged by clients who are not pleased with their current vendor and want a core vendor evaluation analysis performed. Because of these engagements, my view has been based on clients with troubled relationships to begin with. But, in the last five years or so, I have also been hired to perform simple contract renewal negotiations – not vendor change. In fact, more often than not, these clients are not pleased with their core vendor either, but feel that renewal is their only option. Vendors that tout their renewal rates should hear what is said about them behind closed doors – or they should carefully consider these two surveys.

In August, Bank Director published its annual Technology Survey that provides a great deal of insight on the market as a whole. Two questions caught my attention. The first – “How likely is your bank to switch its core provider when its contract is due to renew?” Only 55% responded not likely, 11% responded very likely, 20% responded somewhat likely with 14% responding that they were unsure. Even if the 14% that are unsure never consider a switch, that still means nearly one-third of the respondents are considering it. That is astounding. In 2019, the results indicated 60% were not likely to switch vendors, 7% were very likely, 21% were somewhat likely and 12 % were unsure. That is a 10% increase in the number of respondents considering a change from 2019 to 2020.  The second question – “Regarding technology, what issues does the board currently focus on?” has been included in the survey for the past 4 years. In 2017, 36% responded with “Our relationship with our core technology provider.” In 2018, it remained the same; in 2019 it jumped to 42%; and in the current survey it was 32%. A bit better, but that is still a significant number of community bankers that are elevating vendor relationship issues to their board’s attention. Which further supports that nearly a third of the respondents are considering a core vendor switch.

A second equally interesting survey was released on September 30 at the Community Banking in the 21st Century Research and Policy Conference sponsored by the Federal Reserve, the Conference of State Bank Supervisors, and the FDIC. In this survey, 40.8% of the respondents were either dissatisfied or highly dissatisfied in response to “Regarding core processing services at your bank, whether in-house or through an external provider, how satisfied are you with cost?” A startling 48.1% of the respondents were either dissatisfied or highly dissatisfied in response to “Regarding core processing services at your bank, whether in-house or through an external provider, how satisfied are you with their flexibility?” A variety of other technology satisfaction questions were asked. All with responses for dissatisfaction in the 30% range.

In the past two months, I have had three former clients reach out for advice on service and contract issues with their core vendor. I see the frustration mounting when I speak with bankers. So did the ABA when it formed the Core Platforms Committee to help their member banks improve their relationships with core platform providers, promote core innovation, and provide recommendations for banks and their cores to move forward together.

Clearly something is wrong – very wrong. I have written about this in the past, three years ago in two blog entries The Arrogance of Technology and a follow up entry The Most Overused Word in Technology. I do not believe there has been any improvement since then. In fact, I believe it has gotten worse. These survey results back that up.

I am not a change agent, but sometimes change is clearly needed. Is it any wonder that 40% of respondents feel they are paying too much? With dissatisfaction rates in the 30% range, it is a valid question to ask if indeed the grass is actually greener on the other side of the fence. It can be better, though. A better relationship can be obtained if approached the right way. Fleeing a vendor for poor service, with service as the only metric for vendor selection will not necessarily yield positive results. There are several issues to confront as banking technology has become increasingly complex. Complexity will not decrease over time; it is as simple today as it will ever be. Do not kick the can down the road because it appears too difficult. Left alone it will only become worse in the future. Doing nothing solves nothing.

As you begin to make plans for 2021, please reach out to me if you would like to discuss the options available to your institution. There can be a resolution. Not every institution is dissatisfied, some are where you wish your institution is now.  But as the surveys show, it is not getting any better, and I doubt that it will on its own. It is time to act.

 

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