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Similar to CU Connect: 10 Things Your Core IT Supplier Will Not Tell You - Redacted
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CU Connect: 10 Things Your Core IT Supplier Will Not Tell You - Redacted
- 1. SECRETS REVEALED 10 Things Your Core IT Supplier Will NOT Tell You
- 2. 2 DEFINE: “CORE & IT” Account & Data Processing Item Processing ATM/EFT Services Internet Banking Bill Payment Card Services Network (WAN) Monitoring Server Management / Protection
- 3. asilva@paladin-fs.com 877-746-4859 x 704 CEO of Paladin fs & The Golden Contract Coalition Professional Negotiator AARON SILVA 138 Wins / 0 Losses $346 Million in Cost Reduction $108 Million in Merger Value Accretion Paladin Blue Book $500 Billion + 30 years IT Contract Negotiations Launched June 2016 Group “Offensive” Negotiations 100+ Institutions
- 4. 4 9.15% 8.77% 10.71% 0.30% 3.75% 15.08% 13.75% 19.76% 12.78% 8.67% 2014 2015 2016 2017 2018 PercentIncrease Total Non Interest Expense Data Processing Expense TECHNOLOGY & RISING Technology cost rising faster than other non-interest expenses Source: Financial Information Systems Core IT Solution Market Competitiveness Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 5. 5 2019 FINANCIAL CANTOR FITZGERALD, EVERCORE AND CITADEL RESEARCH FIS Fiserv Jack Henry Free Cash Flow $1.5 Billion (+$37M) $1.2 Billion (-$20M) $230 Million (-$25M) Capital Expenditures 1% of revenue 6% of revenue 4% of revenue Product Development 6% of revenue 3% of revenue 8% of revenue Focus • Data center consolidation • Loud strategy • Modernization of omnichannel and digital banking solutions • User experience updates • Enhancements to platforms • Payments integration • Digital solutions • Card Processing platform migration • Treasury management • JHA Payments Hub • Open banking strategy Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 6. 6 LEGACY CORE & IT SUPPLIERS POSE A CLEAR AND PRESENT DANGER TO OUR INDUSTRY Uncompetitive vintage services are OVER-PRICED and void of any market price efficiency. Suppliers have NO INTEREST in financially guaranteeing the quality or performance of any of their services or systems. Core & IT suppliers DO NOT INNOVATE and actively manufacture barriers to outside competitive fintech alternatives. Contracts are ONE-SIDED, outmoded, legally defective and INTRODUCE SYSTEMIC RISK into every banking franchise. While the industry struggles to survive through contraction, suppliers thrive as SILENT SHAREHOLDERS in every M&A transaction. Other than these facts…they’re a great “PARTNER”!
- 7. 7 I’M NOT HERE TO BASH LEGACY CORE & IT SUPPLIERS BASH
- 8. 8 You have few market choices.
- 9. 9 WHY ARE CORE IT AGREEMENTS SO UNFAIR? MARKET PENETRATION: OLIGOPOLY 93% institutions ABOVE $1 billions assets 85% institutions BELOW $1 billion assets American Banker May 2018
- 10. 10 90% 2018 IT’S NICE TO BE THE OLIGOPOLY! Market Performance, Penetration & Control DOW, NASDQ, S&P 68% 2012 74% 2014 85% 2016 0% 50% 100 % 150 % 200 % 2015 2016 2017 2018 2019 204.38% 164.42% 114.07% 96.24% 62.33% 55.90% Launched in 2016 FISV 123.29 FIS 92.68 JKYH 102.38 Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 11. 11 Those are NOT Service Level Agreements.
- 12. 12 THE CORE IT OLIGOPOLY IS POWERFUL 20,000 statements accidentally sent to wrong bank customers by an Item Processing supplier The outcome A major GLBA violation Hundred hours of customer support to repair disaster Incalculable reputational damage OLIGOPOLY OVER SERVICE LEVELS Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 13. 13 DO YOU KNOW THE DIFFERENCE? SERVICE LEVEL OBJECTIVES (what you ACTUALLY have) SERVICE LEVEL AGREEMENTS (what you think you have) Commitment to perform (subjective). Processes or functions that are not necessarily critical nor can be measured easily by bank. Not defined or described. If a ‘miss’ continues – buyer can ‘redial’. They fix the problem using ‘best effort’. If buyer is harmed you must beg for compensation or pay great penalties to leave the service or contract. Guaranteed performance standard. Tied to meaningful defined processes or functions. If a ‘miss’ occurs – a credit is issued. If a ‘miss’ continues – buyer gains certain rights. If a ‘miss’ occurs too many times – buyer may leave the service or contract with no penalties. Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 14. 14 You don’t know the game (as well as they do).
- 15. 15 THE CORE IT OLIGOPOLY IS POWERFUL THE COMPROMISE: Credit union extended their agreement by 3 years. supplier reduced setup fee by 50% ($50,000). a supplier quoted $100,000 as setup fee for 3 new products. the credit union needed the products to compete, even without the budget. OLIGOPOLY OVER PRICING Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 16. 16 Clawbacks.
- 17. 17 RESULTING FROM A MERGER A $700m credit union planned to terminate their agreement three months early Why? To allow conversion after 9 years with FISERV Estimated Termination Fee $120,000 at 80% value X remaining term MERGER NIGHTMARES “CUFF ‘EM DAN-O” Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 18. 18 Punished for helping your supplier GAIN or MAINTAIN market share.
- 19. 19 THE CORE IT OLIGOPOLY IS POWERFUL OLIGOPOLY OVER MERGERS Credit union Processed By Buys an Institution Processed By a Competitor CU 1 CU 2 $860,000 PAID TO (Termination, de-conversion expense) $460,000 PAID TO (Conversion, programming and interface fees) Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 20. 20 Credit Union 1 36 Months Remaining on Contract Credit Union 2 24 Months Remaining on Contract THE CORE IT OLIGOPOLY IS POWERFUL OLIGOPOLY OVER MERGERS Two Credit Unions Merge Using SAME Processor CU 1 CU 2 Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 21. 21 IT’S REALLY NICE TO BE THEM! Termination, Conversion and Integration Revenue $223M to $261M $281M to $320M $360M to $410M+ Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 22. 22 They bank on you making mistakes
- 23. 23 Accepting only ECONOMIC BENEFITS Outsourcing to your LEGAL COUNSEL Allowing your SUPPLIER RELATIONSHIP MANAGER to negotiate for you Relinquish the POWER SEAT COMMON NEGOTIATING MISTAKES
- 24. 24 Are YOU prepared to risk millions of franchise value and make long-term mistakes on a GUESS?
- 26. 26 “There is an 86.5% probability of failure captain.”
- 27. 27 IS MY CONTRACT & PRICING VULNERABLE? 8 of 10 contracts are 13.1% - 43.1% above FMV Average impact is $ 1.38 Million per institution or more 99% of contracts have critical business & legal term defects Vendors do not volunteer benefits (you must demand)
- 28. 28 MARKET GAP MEASUREMENT Comparison of Pricing & Contract to Paladin Blue Market Intelligence 2 2.5 2 2.5 2 2.5 4.5 5 4 4.5 4 4 Bank Blue Book Price Structure – Long Term Available Discounts Contract – Service Level Contract – Legal Balance Contract – Compliance Price Structure – Short Term
- 29. 29 Suppliers Limit YOUR Access to New FinTech Alternatives
- 30. 30 IT CHASM COMPETITIVE TECHNOLOGY “CHASM” IS LARGE Friendly FinTech is moving to fill the IT CHASM created by Legacy Core & IT Loan Origination Systems Robot Process Automation Online Banking Artificial Intelligence Advanced Payments Mobile Banking Decision Intelligence Block Chain Voice Banking Chat BOTs Crypto- Currencies
- 31. 31 CONTRACTS LIMIT FUTURE COMPETITIVENESS RESULT: SMALL INSTITUTIONS ARE UNABLE TO COMPETE WITH LARGER COMPETITORS Alternative Competitive Suppliers Fintech Suppliers & Solutions Incentives for Innovation (The IT GAP) Fair Market Pricing
- 32. 32 BARRIERS TO FINTECH ACCESS Contractual and Financial Penalties designed by Core IT Suppliers Your Data
- 33. 33 Your Data BARRIERS TO FINTECH ACCESS Contractual and Financial Penalties designed by Core IT Suppliers Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 35. 35 Early bird Red zoneSweet Spot 36 30 24 18 12 0 Least Good Most CostReductionOpportunity THE QUICK AND THE DEAD Begin research 24-30 months Sign in the “sweet spot” Switching leverage erodes quickly in RED ZONE Call to Action: Yellow – Get started. Blue – Get it done. Red – Get moving!! Months Remaining on Contract Sweet Spot 18 months 24 months
- 36. 36 THE VENDOR SHELL GAME Month 2 Month 2 Years 1 Year 4 Years 5 Years 3 Years 3 Years 6 Months 0 1 2 3 4 5 6 7 Managed Services Network / WAN ATM / EFT Bill Payment Internet Banking Item Processing Account Processing
- 37. 37 It’s Time to Change the Game.
- 38. 38 UNLEASH YOUR COMPETITIVE ADVANTAGE NEVER let your trust for a vendor get in the way of your critical thinking, business sense and fiduciary responsibility. Your vendor will NEVER volunteer something that benefits you more than them – you have to know what to ask for. NEVER go into a multi-year, multi-million dollar negotiation without doing your research and having hard market intelligence in your pocket before the negotiation!
- 39. 39 $0 COST REDUCTION AND CONTRACT ASSESSMENT EMAIL US info@paladin-fs.com Call Us: 877.746.4859 3 Current Invoices + Contracts Completely Confidential No Cost No Obligation
- 40. 40 Join now @ GoldenContract.com Footer The only national banking coalition fighting for Banks against the Core IT oligopoly for a fair deal.
- 41. 41 Don’t leave without handing in your response card
- 42. paladin-fs.com THANK YOU Aaron Silva 877-746-4859 x 704 asilva@paladin-fs.com asilva@goldencontract.com