The Utility Fallacy
Why Your Core Banking Provider Is More Like the Electric Company Than You Think
There’s a moment many credit union leaders have experienced. You’re sitting in a vendor conference, surrounded by polished presentations and branded lanyards, and someone from the stage says: “Your core is the foundation of your member experience.”
They’re not wrong. But they’re not entirely right either.
When you flip on a light switch at your branch, you don’t think about the power company. You don’t marvel at the grid. The lights come on. That’s the expectation. That’s the contract.
Your core banking system is the light switch.
The Utility Defined
An electric utility delivers a standardized, reliable commodity to everyone on the grid. The hospital and the coffee shop next door get the same electricity. The utility doesn’t know your members. It doesn’t understand your community charter or your lending philosophy. It keeps the lights on, and that’s enough.
Core banking providers operate under the same model, whether they admit it or not. Jack Henry, Corelation, Fiserv -- these platforms process transactions, maintain ledgers, and ensure compliance. They are infrastructure. They are the grid. The moment you treat them as anything more, you’ve handed them leverage they haven’t earned.
“Your competitive differentiation doesn’t live inside your core. It lives in your lending philosophy, your member service culture, your willingness to approve a loan an algorithm would reject.”
Differentiation Doesn’t Live in the Meter Box
The restaurant and the data center both draw from the same grid. One makes pasta. One processes payroll for half the state. The electricity doesn’t know the difference. Value creation happens above the meter.
Your competitive differentiation doesn’t live inside your core. It lives in your lending philosophy, your member service culture, your willingness to approve a loan an algorithm would reject. When credit unions conflate the utility layer with the differentiation layer, they over-invest in core customization, let vendor upgrade cycles drive their technology roadmap, and sit in conferences nodding along to the idea that their core is their strategy.
It isn’t. It’s your meter box.
The Plug Problem
If there’s one area where cores actually do differentiate, it’s integration, and the gap between modern and legacy providers is significant.
Newer core platforms are built with open, API-first architectures that make it relatively straightforward to connect fintech partners, data platforms, and member-facing tools. Legacy providers, by contrast, often treat integration access as a revenue stream and a control mechanism. They gatekeep their own APIs, charge premium fees for third-party connections, and create enough friction to steer you toward their own partner ecosystem.
Imagine if your power company told you it only supports a proprietary plug standard. Your appliances, your EV charger, your solar inverter; all of it has to be sourced from their approved vendor list, at their approved margins. You’d rightly call that an abuse of infrastructure position. But that’s exactly what legacy core providers have been doing for years, and the industry has largely accepted it as the cost of doing business.
It isn’t. It’s a tax on your agility.
“Legacy core providers have been abusing their infrastructure position for years, and the industry has largely accepted it as the cost of doing business. It isn’t. It’s a tax on your agility.”
The Smart Home Problem
Anyone who has tried to build a truly integrated smart home knows the frustration. You buy a thermostat from one brand, a doorbell from another, lighting from a third, and getting them to talk to each other becomes a part-time job. The industry has produced an alphabet soup of competing standards: Zigbee, Z-Wave, Thread, Bluetooth Low Energy, or HomeKit each with its own ecosystem, its own device compatibility matrix, and its own implicit vendor allegiance. Every manufacturer wants to be the hub. Every platform wants to be the standard. The result is a fragmented landscape where the consumer bears all the integration burden while vendors protect their walled gardens.
Core banking is the same problem at institutional scale. Jack Henry gives you SymConnect and SymXchange. Corelation has Keybridge. Fiserv offers Communicator Open and CoreAPI . Each one is that vendor’s proprietary plug standard functional within their ecosystem, friction-filled the moment you try to reach outside it. Choosing a core means inheriting its integration dialect, its partner approval process, and its timeline for exposing the capabilities you actually need. Just like the smart home buyer who discovers their new thermostat doesn’t speak Thread, credit unions routinely find that the integration they need either doesn’t exist, sits behind a fee schedule, or requires a years-long roadmap request.
This is, frankly, where I think the CFPB missed the mark. The regulatory energy around open banking has largely been directed at banks and credit unions as the responsible parties for data sharing and consumer access. That’s not wrong, but it’s incomplete. The real offenders of vendor lock-in in this industry aren’t the financial institutions -- they’re the core providers who have built moats around foundational infrastructure that credit unions have no practical ability to abandon. Regulatory pressure applied at the core provider level, requiring open and standardized integration access, would do more for financial services innovation than any number of compliance mandates pushed downstream to institutions.
“The real offenders of vendor lock-in in this industry aren’t the financial institutions. They’re the core providers who have built moats around infrastructure that credit unions have no practical ability to abandon.”
What This Means Practically
Stop negotiating your core contract like a consumer. Start negotiating like a utility commission. Know your true switching costs. Know your data portability rights. Know your SLAs and the teeth behind them. Benchmark your per-account costs and demand transparency. And pay close attention to how your core prices integration access -- because some providers have found a new way to monetize the meter box itself, charging per API call for access to your own data. That’s not a technology fee. That’s a toll booth on your own infrastructure, and it deserves exactly that level of scrutiny.
The differentiation in your institution doesn’t live in the core. It never did. It lives above the meter in the digital banking platform your members open every morning, in the loan origination system that determines how fast and how fairly you say yes, in the collections platform that reflects your values when members are struggling, and in the teller experience that defines your branch culture. These are the surfaces where your strategy becomes real. These are the decisions where best-of-breed selection, thoughtful integration, and intentional member experience design actually move the needle.
Your core’s job is to be invisible. Reliable, compliant, and invisible. When it’s doing its job well, you shouldn’t be thinking about it and that’s exactly the point. The credit unions that will win in the next decade aren’t the ones with the most sophisticated core system. They’re the ones that treat the core as the utility it is, hold it to utility-level accountability, and pour their strategic energy into everything built on top of it.
The power company keeps the lights on. What you build with that power is entirely up to you. Choose wisely above the meter.
Note, this isn’t entirely a CORE issue. You can find and replace the word “core” with digital banking provider, Loan Origination Provider, or Collections Provider and still be on the mark. I just think the legacy core vendors are the biggest offenders of this lock-in monolithic build strategy from the 70’s mainframes.
Jason Tilley is the Chief Information Officer at 1st Advantage Federal Credit Union and the host of The Knowledge Stack, a podcast exploring economics, philosophy, and management theory for credit union leaders.