The document discusses the disruption of legacy core banking systems by financial technology (fintech) companies. It notes that smaller banks are under pressure from large banks and fintechs. Legacy core suppliers like Fiserv, FIS, and Jack Henry control over 90% of the core processing market but only spend a small portion of free cash flow on innovation, leaving a gap that fintechs are filling. The legacy systems wall off banks from competition by limiting open APIs and charging high fees. The document argues that banks need to develop fintech innovation plans to adopt new technologies and restructure contracts to remove barriers to working with competitive fintech suppliers in order to better compete.

1. FINTECH DISRUPTION
OF THE CORE IT
OBSTRUCTION
Navigating market, economic and contractual obstacles
to fintech adoption and digital transformation

2. 2
$236 Million in Merger
Value Accretion
$386 Million in
Cost Reduction
276 Wins / 0 Losses
Paladin Blue Book
Launched June 2016
Group “Offensive”
Negotiations
200+ Institutions
Target $1B in Total Contract Revenue
$500 Billion + 30 years
IT Contract Negotiations
AARON SILVA
CEO of Paladin fs & The Golden Contract Coalition
Professional Negotiator & Industry Disrupter

3. 3
The future of banking is here –
like it or not.
Why are legacy cores still
obstructing fintech adoption?
Which fintechs are leading the
market?
A CHANGING LANDSCAPE

4. 4
DEFINE “FINTECH"
DISRUPTIVE
Competing with banks
COLLABORATIVE
”FRIENDLY”
Enhancing banks
LEGACY SUPPLIERS
Fiserv, FIS, Jack Henry, etc.

5. 5
Large Banks Dominate FinTech Investment
SMALL TO MIDSIZE BANKS ARE UNDER SEVERE PRESSURE
Smaller banks are being squeezed by big banks, big tech and fintech
In a Year of Tremendous Growth
Community Banks have Underperformed
Relative to Midsize and Large Banks
8.74%
13.20%
15.75%
18.56%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Community
Banks
S&P 500 Midsize
Banks
Large
Banks
HOW CAN COMMUNITY BANKS COMPETE AGAINST SCALE, CUSTOMERS AND TECHNOLOGY?

6. 6
9.15% 8.77%
10.71%
3.30% 3.75%
15.08%
13.75%
16.76%
12.78%
18.67%
2018 2019 2020 2021 2022
Percent
Increase
Total Non Interest Expense Data Processing Expense
TECHNOLOGY & RISING
Technology cost rising faster than other non-interest expenses
Source: Financial Information Systems
Core Legacy
Market
Competitiveness

7. 7
Control of Major
Payment Rails &
Gateways
Proprietary
“Open” APIs
Pay to Sip
Data Access
Secret upstream
rates, markup and
junk fees
Monetizing Fintech Revolution
Disrupting Access to FMV
Interchange
(debit, merchant and credit)
Non-interest (fee) Income
from Interchange
Your Data Fintech
Solutions
Community
Financial
Institutions
WALLED OFF FROM COMPETIVENESS
Oligopoly Expands to Control Fintech Access & Payment Rails
Source: Evercore
Fiserv, FIS and Jack Henry Control 93% of Processing Market
and only spend 6% - 9% FCF on “Innovation”
This section redacted for proprietary
or confidential information.
Please contact Paladin fs
877-746-4859
info@paladin-fs.com
for access

8. 8
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
• Cloud 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
This section redacted for proprietary
or confidential information.
Please contact Paladin fs
877-746-4859
info@paladin-fs.com
for access

9. 9
IT CHASM
LACK OF INNOVATION CREATES A “CHASM”
Friendly FinTech is filling the Innovation CHASM
Loan
Origination
Systems
Robot
Process
Automation
Online
Banking
Artificial
Intelligence
Advanced
Payments
Mobile
Banking
Decision
Intelligence
Block
Chain
Voice
Banking
Chat
BOTs
Crypto-
Currencies

10. 10
LEGACY CORE TECHNOLOGY
WALLS OFF BANKS FROM COMPETITIVENESS
RESULT:
SMALL INSTITUTIONS ARE UNABLE TO COMPETE
WITH LARGER COMPETITORS
N
O
O
P
E
N
A
P
I
s
This section redacted for proprietary
or confidential information.
Please contact Paladin fs
877-746-4859
info@paladin-fs.com
for access

11. 11
LEGACY CORE CONTRACTS
WALLS OFF BANKS FROM 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

12. 12
Your Data
MANUFACTURED BARRIERS TO FINTECH ACCESS
Penalties designed by Legacy Suppliers to Prevent Crossing the Chasm

13. HOPE IS ON THE WAY!
Fintechs show the light

14. 14
14
CORE
Pent up demand
Lack of take-away capital
Risk of change
NO FINTECH CORE MESSIAH (YET)
1
2
3

15. 15
In Market & Proven
In Market / Unproven Pre Market / Unproven
Pre Market / Proven*
NO FINTECH CORE MESSIAH (YET)
*Not proven in U.S. market or in smaller institutions.

16. 16
In Market & Proven
In Market /
Unproven
Pre Market /
Unproven
Pre Market / Proven*
NO FINTECH CORE MESSIAH (YET)
*Not proven in U.S. market or in smaller institutions.
Ineligible for rating:
This section redacted for proprietary
or confidential information.
Please contact Paladin fs
877-746-4859
info@paladin-fs.com
for access

17. 17
In Market & Proven
In Market /
Unproven
Pre Market /
Unproven
Pre Market / Proven*
ONLINE BANKING PLAYERS
Ineligible for rating:
*Abiliti
*DigitalOne
This section redacted for proprietary
or confidential information.
Please contact Paladin fs
877-746-4859
info@paladin-fs.com
for access

18. 18
In Market & Proven
In Market /
Unproven
Pre Market /
Unproven
Pre Market / Proven*
ONLINE ACCOUNT OPENING
This section redacted for proprietary
or confidential information.
Please contact Paladin fs
877-746-4859
info@paladin-fs.com
for access

19. 19
API Name Supplier True Open
Communicator Advantage / Open Fiserv No
Code Connect FIS No
J-Exchange / Connect Jack Henry Kinda
PLAID Plaid Yes
MX MX Yes
NXTSoft NXTSoft Yes
Many other API fintech players not shown – call me for advice.
CROSSING THE CHASM WITH API
Some vendors reward, some punish
Pay 2 Play
Yes
Yes
Yes
Yes
Yes
Yes
Pay Per Sip
(Toll Fee)
Yes
Yes
Kinda
No
No
No
This section redacted for proprietary
or confidential information.
Please contact Paladin fs
877-746-4859
info@paladin-fs.com
for access

20. 20
Educate your executive team and board
of directors.
Assess your technology stack.
Determine where fintech can help.
Develop a 3-5 year fintech innovation plan.
Restructure ALL Core & IT contracts and
pricing to lower or eliminate WALLS to
competitive Fintech suppliers.
Repurpose cost savings toward Fintech
initiatives, purchase APIs.
Build / buy data warehouse to create a Toll-free
BRIDGE to YOUR DATA.
TWO PRONGED FINTECH ATTACK
PREPARE FOR FINTECH ADOPTION
DE-HANDCUFF FROM LEGACY CORE

21. 21
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22. 22
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THANK YOU
Aaron Silva
877-746-4859 x 704
asilva@paladin-fs.com
asilva@goldencontract.com