Independent Banker - November 2017 - 44

isn't always being realized. " We
began hearing from our members
that they weren't sure the systems
they currently had could adapt to or
be as slick as all the new technology
out in the marketplace, " says Chris
Lorence, ICBA's group executive
vice president, member engagement
and strategy.
So, last year, ICBA conducted
a survey to learn more about the
community bank-core processor
relationship and to learn how the
relationship could be optimized.
The outcome is a best-practices
publication, the ICBA Core Processor
Resource Guide, which will be distributed
to members this month (see
" Statement of intent, " page 46).
The member-driven survey
unearthed a wealth of opportunity
to deepen the connection
between community banks and
their core processors, turning
a transactional relationship
into more of a collaborative
partnership.
The community bank
perspective
The ICBA survey found that the
core processor market is highly
concentrated. The three largest vendors
account for nearly 70 percent
of the market; adding the two next
biggest vendors brings that fi gure to
83 percent.
It also found that community
banks are increasingly moving from
in-house operations to an outsourced
model. Almost two-thirds
(63 percent) outsource their core
operations, mainly due to a lack of
dedicated staff to oversee the complexity
of cyber-risk management.
" The driver is keeping systems safe
and secure-that's daunting-and
most community banks don't have
that in-house capability 24 hours a
day, seven days a week, " says Ware.
The survey's fi nal major fi nding
was that bank-core processor
relationships are longterm
ones. " We learned
that the vast majority of
44 ICBA IndependentBanker November 2017
community banks had contracts that
were between four and eight years, "
Lorence says. " Over half of the community
banks that were surveyed, or
63 percent, had contracts that were
over fi ve years, which is a really long
time when you think about being
connected to any kind of technology. "
Impingement on staff time is the
main reason, at 72 percent, that
community banks do not change
cores very often. The next most cited
63%
Percentage of community
banks that outsource their
core operations
" If the core
processor doesn't
know what you
need, they can't be
there to provide it
for you. "
-CHRIS LORENCE, ICBA
reason was impact to the customer,
at 63 percent. Perhaps surprisingly,
price was third.
Cost is a factor, but " in reality it has
to do with not having enough time to
evaluate all of the other contenders
and then perhaps do an
apples-to-apples comparison, "
says Lorence.
Larger community
banks like longer terms.
Those with more
than $500 million
in assets were more
likely to seek terms
of four to eight years,
while those with less
than $500 million in
assets went for terms
of less than fi ve years,
Lorence says.
A best practice would
be not to wait until just six
months remain on your community
bank's core processor contract,
but start evaluating options 18 to 24
months before contract renewal and
view the core processor " as a true
partner in the long-term objectives of
what the bank is working towards, "
says Lorence.
Core providers' side of
the equation
The feedback from core processors is
that they are eager to develop more
of an advisory relationship with
community banks, adding that most
community banks are not fully aware
of many of the products and services
they offer. Ware agrees banks may be
unaware of the value that core processors
can bring when it comes to
keeping them abreast of technology.
" Given the numerous demands
Independent Banker - November 2017

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