Banks Own Their Data. But Who Really Controls It?

A while back, one of our banking clients paid its core provider $40,000 to create standard data extracts so it could send its information to KlariVis. It took more than six months to get those files.

Now that same bank wants to expand the information it’s sending us, and I find myself wondering whether we’re about to go through the same process all over again. Another substantial fee? Another six months? I certainly hope not.

Two conversations this past week brought that experience back to mind. A prospective client was told its core provider would charge $7,500 for each report needed to extract its data. In another conversation, our team approached a different core provider to see if we could improve the speed and efficiency of data delivery for our mutual banking clients.

The banks already have a working process. We’ve developed the necessary extracts, and the information is flowing today. The provider explained that it couldn’t make the underlying data available any earlier, and while there was some discussion about potentially improving the efficiency of the existing reports, no specific improvement was identified. Instead, the proposed solution was to recreate the extracts we’d already developed and charge each bank a minimum of $7,500 to activate them.

What exactly would those banks be getting for that additional expense?

When bank data access depends on another provider

What concerns me most about these experiences isn’t simply the expense. It’s what that dependency means for a bank’s ability to execute its strategy.

Think about what happens when a bank decides to invest in a new capability. Leadership identifies an opportunity, evaluates the options, commits the resources, and is ready to move forward. But before it can realize the value of that investment, it discovers that accessing the necessary information depends on another provider’s timeline and pricing.

That’s a difficult position for any leadership team. And it becomes even more consequential when you consider that a bank’s information needs will continue to evolve as its business grows.

A bank should be able to build on its investments, introduce new capabilities, and find new ways to serve its customers without every new data requirement becoming another development project or negotiation. Yet, these experiences raise legitimate questions about how much flexibility some technology relationships actually provide.

Open banking for consumers, and for banks

We spend a great deal of time in banking talking about open banking and giving consumers greater control over their financial information, including the ability to securely share it with the providers and applications they choose. And rightly so. But what about open banking for the banks themselves?

If we’re working to make it easier for consumers to access and share their financial information, shouldn’t we be having a similar conversation about the institutions that serve them? The technical and security considerations are different, but the underlying principle deserves attention. Banks should have meaningful control over how they access and use information maintained across their own technology systems.

I’ve been through core evaluations and conversions, and I understand the complexity and risk involved. I’m certainly not suggesting that one expensive integration warrants changing providers. But if a bank consistently encounters obstacles accessing its own information or introducing capabilities it needs to compete, shouldn’t that be part of the conversation about whether its current core relationship supports where the institution wants to go?

Data silos in banking start with the contract

While these experiences involve core providers, the same questions apply to every major technology relationship. Banks have valuable information sitting in their digital banking platforms, loan origination systems, customer relationship management systems, and many other applications. Each may be performing its intended function perfectly well, but if the bank can’t readily connect that information across the institution, how much value is being left on the table?

We spend considerable time evaluating what a technology system can do before we buy it. I wonder how much time we spend understanding what it might prevent us from doing later.

That’s why I believe data accessibility needs to be part of every major technology evaluation and contract negotiation. What information can the bank access? What rights does the agreement provide? What happens when additional data is needed? What will it cost, how long will it take, and who controls the process?

These are business questions as much as technology questions. And they’re conversations that need to happen before a bank commits to a long-term relationship, not after discovering that its next strategic initiative depends on information it can’t readily access.

Community banks have enough challenges competing in an industry that’s changing as quickly as ours. Their technology partners should be helping them get more value from the investments they’ve already made.

The next time you’re evaluating a technology investment or negotiating a renewal, I’d encourage you to look beyond what the system can do for your bank today. Ask what happens when your needs change tomorrow, and whether your bank will be free to move when it’s ready.