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Navigating Core Service Contracts in Community Banking

Banking Technology


In the landscape of community banking, the decision to consolidate core banking services such as data processing, digital banking, and card processing with a single provider is akin to charting a long-term course for your institution's operational and customer service strategy. As community banks often find themselves bound by a 5–10-year contract with a core provider, the allure of bundled services and potential cost savings is ever-present. Before committing to such a strategic partnership, the National Bankers Association offers some insights on how to weigh the benefits against the potential limitations.


The Case for Integration

Bundling services under one core provider frequently translates to cost efficiency. More than just the monetary aspect, the integration of services from a single provider can lead to better system compatibility and potentially streamlined support, with all technologies falling under one collective umbrella.


For community banks with assets under $300 million, particularly those with modest growth ambitions, this integrated approach often aligns perfectly with their operational needs. Such banks can harness a robust suite of services while ensuring a seamless experience for both their staff and customers.


The Flip Side: Limitations and Flexibility

Nevertheless, the 'all-in' strategy is not without its caveats. A multi-year contract can stifle a bank's flexibility to seek out alternative solutions better tailored to its evolving needs. Additionally, all-in-one providers may not offer best-of-breed solutions across the board, given their broad and diversified service portfolios. This could lead to increased costs and technical challenges when attempting to integrate third-party services, potentially leading to suboptimal functionality.


The Growth Threshold

A pivotal consideration is the scale of your bank's operations and its growth trajectory. Once your institution's assets grow into the $300-500 million range, your technological needs and customer expectations may shift significantly. At this stage, there's a natural inclination to pursue best-of-breed technologies and innovative products that become economically feasible. This evolution might necessitate collaboration with specialized third-party vendors to cater to your bank's expanding and diversifying needs.


Summing Up the Decision

To decide whether to go all-in with your core provider, consider the multitude of factors at play. It's a balance of current operational efficiency against future agility and innovation. Even as you maintain a core provider relationship, there is always room to strategically outsource certain functions to maintain that crucial balance. In conclusion, while an all-in-one approach has its merits, particularly for smaller institutions, a tailored strategy that allows for growth and adaptation may serve you better in the long run as your community bank expands and evolves.


Deciding on what strategy is best for your institution is just the first step in your bank's ongoing technology journey. As your bank grows and your needs evolve, staying informed and flexible in your vendor choices will be key to meeting your strategic growth needs. To navigate this landscape with confidence, be sure to utilize our Fintech Playbook on Third Party Provider Evaluation during your due diligence process. This resource, designed to guide you through the selection of vendors that align with your growth trajectory and service standards, can be downloaded here.



For community bankers, the path to choosing a core service provider is a strategic decision that will impact the bank's trajectory for years to come. Consider all angles, project future needs, and choose a path that aligns with your vision for the bank's growth and service excellence.


To read more of the National Bankers Association blogs, click here.




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