Community banks and credit unions have banded together to use their combined bargaining power to wrest better terms from what they regard as an oligopoly of core processing vendors.
Smaller financial institutions say unfair contract negotiations have been holding them back from developing consumer-facing services on the same level as the large national banks. A group that launched Wednesday, called the Golden Contract Coalition, wants to level the playing field by creating a standard agreement between its member institutions and their core vendors.
"The GCC is the first alliance of its kind where a group of like-minded institutions has the power to create huge waves in the financial industry," Aaron Silva, founder of the coalition and president and CEO of the consulting firm Paladin fs, said in a Wednesday news release. "The vendors and the banks need each other, but there has to be a fair balance established."
The coalition, based in Austin, Texas, has partnered with Pillsbury Winthrop Shaw Pittman LLP, a law firm that specializes in IT contract negotiation, and plans to determine the master commercial terms and legal conditions under which all vendors would operate with the member banks, removing "excessive legalese and self-serving conditions" from agreements and pricing arrangements. This will return money to the community banks' and credit unions' bottom lines, the coalition says.
GCC member banks will also receive individual consulting and price negotiation support according to their asset size.
Community financial institutions have been burdened by underperforming IT functionality, unenforceable service-level agreements, unfavorable contract terms, and overpriced, one-sided deals, the GCC said.