American Bankers Association surveys on banker satisfaction with core providers are cited extensively in a new payments system brief published by the Federal Reserve Bank of Kansas City. While the researchers do not draw any conclusions, they discuss evidence of how “potentially unfair” contract terms may contribute to core provider market power over banks and credit unions.
The researchers highlight 2022 ABA survey results showing that 46% of community banks that used the “big three” of Fiserv, FIS and Jack Henry were extremely or somewhat dissatisfied with their core provider, compared with about 27% of banks that used a smaller core provider, and they highlighted the contrast in ratings by banks and by the cores themselves, noting that “ABA concludes that this gap in effectiveness assessment between the banks and core providers ‘is the root cause of bank leaders’ dissatisfaction with core providers.’”
The article found that the “big three” not only “dominate the U.S. core services market but also have a large presence in related vertical markets, such as card network services; payment processing services for DIs, merchants, or governments; and BaaS.” The researchers discuss the CFPB’s concerns over market power, although they note that “it is difficult to assess whether the Big Three are leveraging this power.”
