Banks’ satisfaction with core providers fell 12 percentage points from 2020 to 2022, according to a new American Bankers Association survey, but few lenders are rushing to switch vendors.

Banks are becoming less and less satisfied with the vendors providing their core banking technology, but few are looking to switch providers. 

The share of banks reporting satisfaction with their core technology provider fell 12 percentage points in two years according to the American Bankers Association’s latest Core Platforms Survey. Released last month, the survey results come more than four years after the national trade group launched a committee to improve the relationships banks have with their core providers. 

The survey, which also included responses from core technology providers, showed that vendors overestimate their effectiveness in helping banks meet their goals. 

But with limited options available for banks to switch core providers and risks involved with making a change anyway, the ABA plans to continue its work to improve the relationships between banks and vendors.  

“There was just a tremendous, jaw-dropping gap in how well bankers believe the platforms are performing compared to how well the vendors themselves believe that their products are performing,” said Russell Davis, executive vice president of member experience at the ABA. “And that really gets to the essence of where the hard work needs to be done going forward.”  

Pandemic Drove Down Satisfaction 

Core technology was once simply a bank’s system of record, said Julieann Thurlow, president and CEO of Reading Cooperative Bank and the original chair of the ABA’s core platforms committee.  

As digital capabilities have expanded, core providers have offered more products and services provided to banks, such as credit and debit card systems, document imaging repositories and loan origination systems. 

ABA committee surveyed banks about their platforms in 2018, 2020 and 2022. Rather than improving, satisfaction fell from 59 percent of banks saying they were satisfied with their provider in 2020 to 47 percent in 2022.   

“In a world where we’re hoping to make great progress and have everyone more satisfied, we actually saw a decline in the satisfaction,” said Davis. 

Factors contributing to the decline in satisfaction included staffing challenges that core providers, like other companies, faced during the pandemic, which affected responses to banks’ requests for support and answers, said Kimberly Kirk, the committee’s current chair and the executive vice president and chief operations officer at Georgia-based Queensborough National Bank & Trust. Banks have also been affected by ongoing internal changes at some core providers, she added. 

About 80 percent of banks use one of the three main core providers, according to the ABA: FIS, Fiserv and Jack Henry. The ABA’s surveys showed that banks using one of these cores had lower satisfaction compared to banks with another core provider.  

The survey results also showed that satisfaction declines after the first couple of years in a bank’s relationship with a core provider, with the lowest satisfaction occurring when the relationship is between five and 10 years old.  

Progress Made, Work Remains 

The ABA’s most recent study also included questions for 13 core providers, including FIS, Fiserv and Jack Henry, where they were asked to assess 17 attributes that help make a bank successful. These attributes had been developed as part of the core platforms committee’s early work. 

Banks and core providers had relatively similar takes on the importance of these attributes. But where they differed was in the core providers’ effectiveness in helping banks meet their goals related to these attributes. Core providers scored their own effectiveness 1.67 points higher on a five-point scale than banks did, a result the ABA is calling an “effectiveness gap.” 

While the gap points to the need for more work to be done, Davis said the alignment between how the banks and core providers viewed the importance of these attributes showed that progress has been made. 

“That really speaks to the good work that Kim and her fellow committee members have been doing for the past several years to try to improve the dialogue and come to a deeper understanding of either side,” Davis said. 

Part of the disconnect creating the effectiveness gap, Reading Cooperative bank’s Thurlow said, comes from how banks and core providers see their roles. Core providers seem to see themselves as defining the direction the industry should go in, she said, while bankers see this as their role.  

“That’s where the rub comes, because banks want to differentiate themselves from other banks,” Thurlow said. “From a core’s perspective, the fewer number of connections that they have into the core, the more protected the core is – and all of their banks.” 

Diane McLaughlin

Why Few Lenders Move 

Despite their dissatisfaction, most banks don’t plan to change their core provider. Only 21 percent of banks told the ABA they were likely to change the next time their contract renewed. 

Changing core providers is an enterprise risk, Thurlow said. Reading Cooperative Bank has used Connecticut-based COCC, which has a cooperative ownership model, for seven years. 

Aaron Silva, CEO of consulting firm Paladin fs, said he has seen satisfaction with core providers decline as well. Paladin fs helps banks and credit unions negotiate contracts with their cores. 

While some smaller core providers offer better services, Silva said, they often lack the capital to innovate. He generally recommends that banks remain with the current provider for their system of record.  

“All the other ancillary stuff, you’ve got to find fintechs to do it,” Silva said. “You cannot rely on [core providers] to do it.”