It will take more than an AI wand to dislodge bank core providers

The bank core providers have quite a nice little entrenched position. Actually, that is understating it. The core providers have a commanding entrenched position. Any upstart trying to steal some business from Fiserv, FIS or Jack Henry has a ton of work to do. 

If you look at the core providers as an industry, and then view that industry through the competitive-advantage analysis developed by Harvard Business School professor Michael Porter, you can see exactly why it's so hard for core competitors. 

I started thinking about Porter forces reading the story from our Melinda Lucy about a startup called Maximum that just raised $30 million in a "seed" round of fund raising (this is a huge amount for a seed round, which usually ranges from $1 million to $5 million and shows how investors just crack the vault wide open for anything AI-related these days) and plans to take on the core providers by providing its own twist on an operating system: Maximum's idea is to bake AI capabilities into its OS rather than to layer them on later. 

There is a certain logic to that idea. Consumers looking for affordable financial advice, for instance, are already as likely to trust an AI tool such as ChatGPT as they are to go to their bank, according to a JD Power survey, as our Jasmine Ni reports. Considering ChatGPT has been around for three years and banks have been around for thousands of years, that is a strong vote in favor of AI. However, Maximum and other startups cannot just wave an AI wand around and build a business from it.

Porter's competitive-advantage framework shows why. This kind of analysis looks at "five forces" that determine a given industry's strength and the odds a competitor can make inroads into it. The forces are the bargaining power of customers (in this case banks), the bargaining power of suppliers, the threat of substitutes, and the threat of new entrants. Those four combine to form the fifth force, competitive rivalry within the industry.

I don't think we need a detailed analysis of each force to conclude that Maximum has its work cut out for it. The complexity of banking infrastructure means that banks have limited bargaining power and limited ability to find substitutes. The bargaining power of suppliers refers to the software and hardware companies that provide components to the providers, so that force doesn't directly affect banks. All of that together means the barriers to entry are very, very high; there is very little threat of new entrants in this business.

The lack of a competitive threat to the core providers also means they have limited incentives to do anything different, which leads to disappointed customers. A 2025 survey from the American Bankers Association concluded that only 53% of banks were satisfied with their core providers. Ostensibly, that is a swirling, flashing light for upstarts. But even banks that aren't happy have very little recourse. Upgrading core systems is a huge undertaking that is a major challenge for banks (Zions took a decade to convert its cores) and it gives the core providers outsized influence and a largely entrenched position.

Read more:

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That doesn't mean these companies have no pressure. The equity of all three has been falling as shareholders have been disappointed in their growth. But that is little comfort for the startups looking for an opening in this industry.

The trend of fintechs and upstarts trying to dislodge the big three core providers has been going on for years. "Big tech companies, with their armies of top-notch developers and knack for creating convenient products, raised their profile in financial services," we wrote in 2019. Yes, in 2019. We wrote that in 2019. Six years is a lifetime in the tech world. But the big three core providers are still the big three core providers. Like I said, Maximum's idea has some merit, but for all the hype the AI part of it is probably one of the smallest elements of a bank's core systems.