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Blog / Feb. 2, 2017

How to Protect Your Bank Against Termination Fees

Switching to a different core banking partner or technology vendor can be an incredibly stressful endeavor for financial institutions. With so many things to consider when contemplating a change, it’s easy to forget key details.

For example, how much will it cost to terminate your current contracts?

David Saylor, president and founder of Genesys Technology Group, recently wrote an informative piece about the different types of termination fees–and how banks can protect themselves during their next contract negotiation.

Saylor breaks down termination fees into three categories:

  • Liquidated damages are the fees you pay to terminate a contract early. Saylor says you cannot completely eliminate liquidated damages, but you can negotiate them and carve out some language specifically for mergers and acquisitions.
  • Deconversion fees are the fees associated with deconverting (moving) from an existing system or service. According to Saylor, the problem many banks have with deconversion fees is that most contracts do not specifically quote the fees.
  • Legacy data conversion (export/import) fees are the fees associated with exporting legacy data, including check images, document images, signature cards, driver’s license images, etc. Saylor says the fees to export and import legacy data were relatively reasonable for many years, but recently they have increased by a large margin.

Banks must consider all three fee types as they are both establishing and ending relationships with third-party vendors. And the costs can add up quickly if they aren’t managed properly.

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