Whether community banks and credit unions have been able to take advantage of anti-big bank sentiment thus far is the subject of debate. The environment does pose a renewed chance for smaller institutions to ply local familiarity to woo consumers, but for some, older technology gets in the way of providing convenient, multi-channel services.

That has some small banks, such as Batesville, Ark. -based Citizens Bank, embarking on core upgrades to get in shape for the race. The bank’s goal is to make processing more efficient, simplify business continuity, consolidate vendor relationships, and increase speed to market for new innovations in mobile banking and loyalty marketing.

“This could definitely help us take advantage of the economic recovery,” says Jeff Mead, senior vice president of IT for Citizens, “Bankers across the country are looking for ways to improve margins.”

The $530 million-asset Citizens, which has an IT staff of four, is outsourcing much of its technology to Jack Henry, including the tech firm’s SilverLake core processing system and Jack Henry products for deposit automation, voice response, ATM and debit card processing, business intelligence and enterprise reporting, customer rewards and loyalty, fraud prevention, and enterprise content management.

“We currently have a number of products that are third party-type relationships for internet banking, loan platforms and other systems,” says Mead, noting Citizens previously had relationships with more than a half dozen tech vendors. “We are looking to integrate all of these systems, tie them together and eliminate some of the duplication of work.”

Mead says that for a product upgrade such as adding a new ATM card, the bank under its old mix of internally licensed and hosted solutions would have to initiate processing arrangements with different vendors that managed the bank’s ATM and card technology. “Using Silverlake allows us to eliminate these steps.”

Citizens has an aggressive new product deployment schedule that corresponds to its core upgrade, including a new checking rewards program and an expansion of mobile banking capabilities that will benefit from the centralized tech platform. “The rewards program does quite a bit more than we are able to do now, such as setting up different sets of criteria that we pay rewards on. It’s a more competitive product,” says Mead, whose bank competes with other local community banks as well as larger banks such as Regents and Bank of America, which both have a substantial presence in Citizens’ footprint.

Citizens is not alone. Other recent community bank core outsourcing deals include Aliant, a $944 million-asset bank based in Alexander City, Ala., that will use FIS’ Horizon core processing platform. Under this arrangement, Aliant will avoid purchasing and maintaining onsite hardware for core solution operation. It will use Horizon to drive document management, electronic funds transfer processing and integrated card management.

The strategy is not without challenges. Small banks don’t have the negotiating heft of the larger banks when negotiating with large core providers, and thus don’t have the same ability to leverage the core upgrade to offer financial services that are truly differentiated from other banks.

“Their size prevents them form choosing a best of breed solution, so they have to become more commoditized with their offers,” says Marc DeCastro, a research director for IDC Financial Insights.

But DeCastro also says the anti-big-bank sentiment can play against the commoditized/non differentiated solutions that smaller banks offer via outsourcing. “There’s a great deal of resentment in this country of Wall Street and the big banks, and there’s been a movement toward ‘I want to stick with a local bank’ on behalf of consumers,” says DeCastro.

While the customization that larger banks can get from negotiating multi-million-dollar deals with core providers is too expensive for a bank of Citizens size, Mead says there is a strategic similarity among smaller banks that does give banks such as Citizens a chance to influence the tech solutions. SilverLake has about 500 clients -- many of which are small to mid-sized institutions, providing the opportunity for a form of group customization.

“I would say that we have not had the features that met the needs of what we were looking for in the past,” says Mead. “Jack Henry has a wide user base and gets ideas and input from other similar bankers around the country that are looking for the same kind of information and features that we are looking for.”