ABA Offers Recommendations to Improve Bank-Core Provider Relationships

To Whom It May Concern:

Thank you for meeting with the American Bankers Association's Core Platforms Committee to discuss how core service providers impact community banks' ability to digitalize and innovate. In addition to the work that the FFIEC Community Bank and Credit Union Digitalization Subcommittee is doing on this subject, we appreciate Treasury Secretary Scott Bessent's commitment to conduct "a review of the core platform providers, including contract terms that prevent community banks from innovating for the future" as well as Comptroller Jonathan Gould’s recent comments acknowledging his concerns regarding the dynamics between banks and "very large, oligopolistic core providers."

To further support the banking agencies' work, this letter provides additional information about the challenges community banks face and recommends actions the agencies can consider to reduce these barriers and promote meaningful choice in the core provider marketplace. We will submit a separate letter responding to the OCC's Request for Information on Community Banks' Engagement with Core Service Providers and Other Essential Third-Party Service Providers.

Core service providers are the technology backbone of modern banking. They power nearly every aspect of operations—from account opening and transaction processing to loan management, compliance, and reporting. Community banks typically operate with limited in-house technical resources and are particularly dependent on their core processors. As a result, a core provider significantly impacts a community bank’s day-to-day operations as well as its ability to adapt to a rapidly evolving marketplace and technology landscape—both of which affect a bank’s business strategy.

Community banks must have the ability to choose the right core platform and ancillary technology service providers, hold them accountable through enforceable service standards, and make changes as strategic needs evolve. Yet, community banks face significant challenges in doing so. Many of these obstacles are driven by core service providers. But others stem from longstanding regulatory practices that unintentionally hinder community banks from converting to a more forward-looking core provider.

Addressing these issues is essential to ensuring that community banks have the freedom to innovate, which is critical to preserving the long-term viability of the community bank model.

Download the letter to read the full text.