Welcome To
The Bottom Line

For anyone working at a company with a calendar-based fiscal year, the August dog days of summer also mean the advent of the annual planning cycle. Odds are that department heads are being asked to “do more with less,” or at least to increase output at a faster rate than costs. As anyone with budget responsibility is well aware, it’s no easy task to fund reasonable pay increases for valued employees let alone accommodate growth in other expense areas.

Much has been written about the “stickiness” of consumer payment apps and their value in cementing bank and credit union relationships with customers and members, but behind the scenes at most financial institutions (FIs) there is a far stickier relationship.  In this relationship, the bank or credit union is the customer and the cement composed of those mission critical services provided by their core processing vendor.

Most bankers would agree that, all other things being equal, minimizing the cost of complexity is a key operational goal, which normally means consolidating around a limited number of financial services vendors. The big “gotcha” in the above statement, however, is that all other things are rarely equal, and recent industry trends reveal that other factors are at work.

In a perfect world, core banking service providers would serve as one-stop shops for ancillary products like mobile banking and remote deposit capture as well. In fact, an acquisition spree by the cores over recent years was aimed to round out their portfolios and solidify that single-source status. Recently, however, newer startups have delivered compelling enough innovations to prompt financial institutions (FIs) to expand their horizons. 

The spiraling cost of complying with an ever increasing regulatory burden is possibly the greatest challenge facing US banks and credit unions – it’s not an exaggeration to label it an existential threat for some institutions. However, this threat can be mitigated by utilizing expertise available from compliance and strategic sourcing firms as well as via software automation. It won’t make the regulations go away, but it makes the process more efficient and helps make it less likely that something is overlooked.