Think about the traits of an oligopoly:Handful of market competitors Price rigidity Interdependence (few players means each has heavy influence on the others) Modeled for maximum profit High barriers to entry
OK, so we’re facing an oligopoly. We have immense power and influence concentrated in a relatively few vendors. That’s a fact of life, so no use bitching about it. Better to just face it, understand the implications, and plan what to do about it.
“This ain’t no party, this ain’t no disco
This ain’t no fooling around.”
-Talking Heads, Life During Wartime
The strength that an oligopoly provides the vendors will be a hot poker in the side of many a bank and credit union CIO in coming years. Concentration of power is easily the biggest vendor de-motivator out there, and our Big Four have that in spades. The bottom line is that as the playing field diminishes, the remaining players are going to grow more powerful, more arrogant, and less likely to make decisions with customers’ interests at heart. Why? Well, because they can.
Integrating with The Big Four – Integration between two Big Four vendors’ products is a dying breed and threatening to be extinct in short order. “Coopetition” between the big boys existed only until they could figure out how to kill it. Fiserv clients – ever tried to integrate JHA’s iPay bill pay solution to Corillian? You may as well cut your own legs off at the knees. IBS clients – are you finding 100% cooperation from FIS in your efforts to integrate D&H’s CreditPath?
Despite all of the vendor chest thumping about how open their systems are, integrating a system from Vendor A into a product from Vendor B has never been easy or remotely affordable. That is only going to get worse. In the ongoing oligopolic wallet share grab, The Big Four simply are not at all motivated to play nicely together – even if that means they piss off a few clients along the way.
And forget it if you want to integrate an upstart ancillary vendor to a Big Four core. Those barriers are high now and bound to get steeper as the Big Four play hardball. The chances of a Big Four vendor raising a finger to help a bank integrate that startup PFM company’s product into its core are slim now and sliding toward none.
Another group that will find massive roadblocks with the Big Four as they cockily gain market share are banks that want to integrate third party debit, credit and ATM processors. Make no mistake – Fiserv and FIS are payments companies now; payments is where the profit and revenue growth are. Jack Henry is moving that way. But for the Big Four vendors that have their own debit/credit solutions, banks and credit unions wanting to utilize the services of the PSCUs, Vantivs and First Datas of the world are going to find it extremely difficult and repressively expensive.
Service – Clearly, the second element of vendor performance sure to take a hit soon is service. The fewer the competitors, the less important service will be to The Big Four. I’m not saying service will tank all of a sudden. It will be gradual. Vendors will start winning stare-downs they used to cave on because – well, what’s the bank going to do, convert? Service reps’ contribution will be further devalued and relegated to Redheaded Stepchild status by The Big Four, and the good ones will leave.
“You make me shiver, I feel so tender
We make a pretty good team.”
-Talking Heads, Life During Wartime
Silver Lining – Of course, it’s not all bad during life in wartime. Strong ancillary vendors will gain power. For the few real market makers in the ancillary markets, the truly strong will gain power versus the cores and be in an even better position to help their bank and CU clients. For example, MeridianLink for account opening is eclipsing (re-seller) Jack Henry from a market momentum and development perspective, forcing JHA to be very accommodating to its clients when it comes to MeridianLink. Akcelerant for collections is emerging as a strong standard bearer, forcing fake grins from Big Four sales reps when asked if they will work with Akcelerant.
“Fight the good fight every moment
Make it worth the price we pay”
-Triumph, Fight the Good Fight
A few pieces of Gonzo advice for working in life during an oligopolic wartime include:
The sky isn’t falling GonzoBankers, but it’s getting cloudy with a chance of Heavy BS from The Big Four. Change your strategies in dealing with them or the storm will overwhelm you.
Thanks to fellow GonzoBanker Terence Roche for his significant contribution to this article. -SMH
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