As data processing companies merge, many community bankers are worrying about getting lost in the shuffle.
The major vendors of outsourcing services-Alltel Information Services Inc., Electronic Data Systems Corp., Fiserv Inc., and M&I Data Services Inc.-continue to sell services to community banks. But they are also catering increasingly to the more complex needs of larger institutions, rewarded by the lucrative contracts such services bring.
Community bankers fear their voices in influencing big service bureaus and keeping them accountable will grow ever fainter.
"Their fears are justified," said Arthur S. Doll, an executive vice president at Connecticut On-line Computer Center Inc., a bank outsourcing company based in Avon, Conn.
He said community banks increasingly have a hard time getting vendors- especially the largest ones-to heed their concerns about the timing of upgrades, the features of software, and pricing.
"If you're under $250 million, you have to beg these guys to 'please, come and sell me a product,'" said Carl A. Faulkner, managing director of M One Inc. in Phoenix. Even then, "the chances that someone will show up ... are pretty slim."
Officials at the big-name outsourcing organizations generally acknowledged that larger banks have gotten more attention in recent years. They attributed this, in part, to the banking consolidation that has boosted the size of the average financial institution.
But they denied consciously neglecting the community bank market.
"We're not abandoning the community bank or the mid-tier banking market," said J. Michael Hill, senior vice president at Little Rock-based Alltel. "I don't think that their voice has diminished."
Some community bankers disagree. When Alltel recently said community bank customers at a California operation would have to convert to new software, customers complained Alltel did not give them proper notice.
For example, International City Bank of Long Beach, Calif., was notified in December that its old contract would be terminated April 1, even though it was scheduled to expire in September 1998.
"I've been in business almost 30 years and I've never experienced anyone doing" what Alltel did, said Jane J. Netherton, president and chief executive officer of the $11 million-asset bank.
"Would I ever use Alltel again? I would probably post manually first," she added. Alltel, for its part, denies giving any bank inadequate time to convert.
Experts said Alltel is hardly the first vendor to cause such consternation, nor is Ms. Netherton the first to voice it. Conversions are a necessary evil and are rarely pleasant for anyone involved.
There may be more such run-ins as vendors look to standardize their offerings.
"For this service to be cost-effective, you have to have a single solution that you are supporting," said Raymond C. Doth, corporate vice president of marketing for Intrieve, a Cincinnati-based processor owned by 150 thrifts and banks.
The declining clout of smaller banks may just be a function of economics.
"There is absolutely no deliberate effort on the part of the bank outsourcers to hurt the little guys," said M. Arthur Gillis, a Dallas-based consultant who tracks the bank outsourcing industry. "These little banks want to be noticed and heeded, but they can't be for what they're paying."
According to Mr. Gillis and others, the consolidation of the outsourcing industry affects how small banks are being treated.
Over the last few years, the processing industry's market share has been concentrated in a shrinking number of vendors. In 1995, 14 vendors provided 93% of the core processing services for banks that outsourced, according to Mr. Gillis.
Back in 1987, 24 vendors controlled 73% of the market.
Regional servicers that were small enough to give an ear to individual community banks have been swallowed up by larger competitors. The result: "For the most part when a small bank is in an environment where there's 700 banks and most of them are big-paying banks, they're not going to get much attention," said Mr. Gillis.
Bank outsourcers are trying to fix the situation. Several said they are placing an increasing emphasis on user-group meetings and encouraging community bankers who want their voices heard to participate.
Community banks, for their part, also are looking for creative solutions. Some are pooling processing or forming loose affiliations that will improve their clout with top vendors.
But several bankers said processing decisions for smaller banks are likely to get tougher and tougher as the parallel consolidations in banking and data processing continue.
