The banking industry has become accustomed to baby steps in core systems development, with a truly new product rolling out only once every few years. And when it comes to adoption of new technology, progress is measured in dog years. However, a new era of core systems competition is about to begin, with almost everything on the table for change. Given the fierce pressure for banks to become tech-driven companies, perhaps we have reached a tipping point. Consider these recent vendor activities:
Core is now table talk in the mid-size banking space. The days of one-stop shopping by banks appear to be dissipating, and CIOs now view their payments, digital, lending, CRM and analytics vendors as critical as the core. If we are lucky, technology costs will move from a tax on the organization to more of an investment in competitiveness to take on the big boys.
Despite the strategic urgency of technology in banking, the majority of bank executives are not using their economic power to help drive positive industry change. A recent Cornerstone survey revealed that 65% of banks and credit unions auto-renew their contracts without giving much (if any) consideration to goings-on in Vendor World. That 65% will eventually get a knock at the door from one or more of the aforementioned vendors. Bank executives are going to be exposed to other options, even if from their own vendors.
So, is change really afoot? We think so, but it’s likely to occur at the snail’s pace typically associated with banking technology. The reasons for this are deeply embedded within our industry, but if real change is to occur, some issues need to be addressed:
So yes, the times they are a-changin’. Finally—and for the better. Bankers will be seeing many more choices to be competitive in the foreseeable future than they have in the past three decades. But only the most nimble banks that get on the early train will be doing it with any sort of speed. The rest? Get in line, folks. It could be a long one.
We believe the industry will be making progress faster than in the past, simply because the vendors are now seeing a path forward. But it’s a long path. In the meantime, there will be a lot of cheese moved, and resource constraints on both the vendor and bank side will often define the critical path. Now is the time for financial institutions to get the flexibility in their contracts that will enable them to take advantage of what’s to come.