Banks' Reliance on Outsourcing Providers Drives US Vendor Consolidation – Report

Forty per cent of US community banks and thrifts currently use an outsourcing provider for core systems processing, according to research by TowerGroup. Within this tier of financial institutions, a chosen IT vendor typically becomes either the bank’s sole IT provider or its first choice for any new services – which has helped to drive significant consolidation among core outsourcing providers, said the company. This consolidation has resulted in just four leading vendors controlling more than 75 per cent of the community bank and thrift core systems outsourcing market. TowerGroup noted that this concentration reflected both increasing economies of scale and declining opportunities for core outsourcing clients.

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