Community lenders tell big tech vendors to get up to speed

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With fewer resources for tech specialists and support staff, community banks and credit unions could be painted as being too small to handle the crush of technological changes needed to be digitally competitive.

But thanks to outsourcing, cloud-based software and application programming interfaces, even the smallest banks are staying nimble — it's the establishment fintech vendor, they said, that can be a drag on their innovation efforts.

“Our hands are tied,” said Jonathan Liguori, chief technology officer of the $600 million-asset Apollo Bank in Miami. “For instance, if it involves online banking it probably would not go to another platform because it would mean we would have to provide another portal to have to log into.”

Ironically, tech vendor service isn't keeping pace with the actual technology they provide, executives said.

“It’s really about service and response time,” said Chris Hollen, CEO and president of the $39 million-asset Diversified Credit Union in Minneapolis.

“When we’re having issues we need help and we need it quickly. The challenge is with a larger institution, many times it just takes so much time to get something researched, fixed and changed. If you’re a smaller institution you almost feel like doing that isn’t going to matter as much, because you’re paying a lot more.”

Apollo Bank gets its core solution and its digital banking platform from tech providers. The bank selectively picks from the products and updates that its providers offer, basing its decision on feedback from its customers, who are mostly business operators.

“If we have enough input from our account people saying they are looking for something then we’ll engage with the vendor and look to release it as quickly as we can,” Liguori said.

For many smaller institutions, the bank or credit union will designate a product champion or employee team that trains the rest of the bank, said Stacey Zengel, vice president of Jack Henry & Associates and president of Jack Henry Banking.

Larger banks require more dedicated training while smaller banks tend to take the provider’s webinar trainings, he said. “It doesn’t work the same at every bank,” he said. “At some organizations they like to train everybody in the bank, and we can do that as well … but we prefer that they designate a key employee.”

Zengel noted that American banks continue to move toward outsourced, cloud-based products that are easier to update and more frequently updated than on-premise technology and systems.

With the U.S. hosting most of the world’s cloud servers, American financial institutions are eager to move things to the cloud, said Mike Dionne, senior vice president of community markets in the Americas at Finastra.

In this regard, smaller banks update more quickly than larger banks that prefer products to be installed on-site.

“The smaller community banks do a better job of staying on top of the releases that we’ve got because the big guys not only are using applications that are running on-premise but they’re connected to a vast ecosystem,” Dionne said.

“There are lots of implications when updating software that sits in a large financial institution. They’ve also got to get through a regression testing process to make sure updates don’t affect or break things connected to the bank.”

As the size of the institution grows, so does its complexity, said Eric Jones, senior vice president of product management for bank solutions at Fiserv. “But it depends on the business model of the bank,” Jones added. “I’ve seen a $300 million bank with a complex lending platform.”

While service providers find it easier to work with smaller institutions, those institutions don’t always find it easier to work with larger service providers.

Diversified Credit Union recently switched from one of the big four core providers to a smaller provider focused on servicing credit unions.

What spurred the change was an instance when Hollen needed a password reset. The employee who usually handles such matters was out of town. Hollen called the service provider and was told that he would be helped in 24 to 48 hours.

“That’s a problem, because it’s a simple password reset and I have members that want to see me all day long,” Hollen said.

Nearing the end of a lengthy contract, Apollo Bank said some vendor-provided services are not as nimble as some of its clients would like them to be.

One product's interface was very outdated. Another didn't allow for customer identification in a flexible format.

“When you’re locked into a multiyear contract on one product, you have to work with the constraints of that product,” Liguori said.

A common concern for any financial institution, Liguori added, is making sure that it stays on the radar of its ever-growing tech vendor.

“There was a time where the service may be great, but as they grow you feel like the stepchild at times," he said. "It can get frustrating sometimes.”

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Community banking Credit unions Fintech Vendor management Jack Henry & Associates Florida Minnesota