Over the past several weeks, CCG Catalyst published a nine-part series examining the OCC’s Request for Information (RFI) on community banks’ relationships with core service providers and other essential technology vendors. That series worked through every major dimension of the bank-provider relationship: innovation barriers, stablecoin readiness, AI gaps, vendor evaluation, data ownership, interoperability, billing practices, transparency, and regulatory burden. Throughout that work, one conclusion kept surfacing: the structural relationship between banks and their technology providers is broken and the way the industry procures technology is a significant part of the problem.

Preparing for those responses to the OCC RFI pushed me to think more rigorously about what ‘better’ actually looks like in practice. Regulatory reform matters. Databases, registries, and examination reforms proposed in the RFI are meaningful steps. But they operate at the institutional level. The procurement transaction itself, the moment when a bank sits across from a vendor and decides on a technology partner still needs to change. And the consulting model sitting in the middle of that transaction needs to change with it.

The banking industry is shrinking at both ends. The number of banks and credit unions continues to decline through consolidation, while the vendor landscape is consolidating just as rapidly. Fewer institutions chasing fewer vendors creates an imbalance of negotiating power that the traditional procurement model was never designed to handle. And yet, the procurement model has barely changed. It is time that it did.

What the OCC RFI Revealed About Procurement

The OCC’s RFI was notable for how directly it named the information irregularity at the heart of bank-vendor relationships. Banks make consequential technology decisions with incomplete pricing data, opaque contract terms, and limited visibility into provider financial health. Three core service providers serve more than 70 percent of depository institutions. In that kind of concentrated market, the traditional levers of procurement, competitive pressure and the credible threat to walk away — carry very little weight.

The RFI also made clear that the fee structures consultants use in these engagements are not a neutral backdrop. They shape incentives, influence relationships, and affect outcomes. If a consulting firm is taking a percentage of savings, its interests are not perfectly aligned with the institution’s long-term relationship with its vendor. That misalignment is subtle but consequential  and it is one the RFI process prompted us to confront directly.

A Model Built for a Different Era

For last several years, technology procurement in banking has been dominated by the success fee firms, or what my partner calls “price compression firms”. Under a percentage process, the consulting firms take a percentage of whatever savings they negotiate during vendor evaluations and contract renewals. The logic sounds straightforward: align the consultant’s incentive with the client’s savings.

In practice, it does not work that way. Based on my conversations with bank executives who believe they overpaid for services and executive leadership at vendor organizations that believe the actual savings achieved under percentage-fee arrangements are generally no different from what a fixed-fee advisor would produce. What does change when savings is the only target,  vendors approach negotiations with distrust, making them more cautious and likely to hedge their positions. The bank or credit union ends up sharing the upside of a deal that should have been entirely theirs, while the vendor relationship is stressed on a foundation of friction rather than collaboration.

As banks and credit unions continue to consolidate, and as the vendor base narrows with them, these dynamics become more consequential, not less. Institutions simply cannot afford adversarial procurement relationships with the technology partners that power their operations.

A Better Structure Already Exists

At CCG Catalyst, we have always been a fixed fee firm. In a fixed-fee engagement, the advisory fee reflects the scope of work and the expertise of the team assigned to support the client, not a percentage of what can be extracted from the vendor. That distinction matters because it keeps the consultant’s focus where it belongs: on the quality of the outcome for the institution.

I recently took that principle a step further by building a fee disclosure model into our technology evaluations and contract negotiations. The mechanics are straightforward. CCG Catalyst charges a fixed fee for advisory services  and that fee, the same amount the client is paying CCG Catalyst, is disclosed to all parties upfront. It is written into our engagement agreement with the client and solicited directly from vendors as part of the business requirements when we ask for their proposed pricing. The winning vendor pays that disclosed consultant fee directly to CCG Catalyst. CCG Catalyst applies the vendor-paid fee as a credit against the client’s consulting invoice, reducing or eliminating the client’s net cost. The vendor’s contribution is a negotiated amount, not to exceed the fee the bank is paying the consultant. Under this structure, the bank’s net consulting expense is reduced to zero or, where the vendor negotiates a lower amount, reduced proportionally. In either case, the savings from the engagement belong entirely to the institution, and every party understands the fee arrangement before the process begins.

Full transparency in documentation is essential to making this work, and so is a clear-eyed understanding of the accounting treatment. Because the consultant fee is solicited from the vendor as part of the initial pricing process, not offered after the fact as a deal concession  and because the amount is capped at what the bank is already paying its consultant, the structure is intended to reflect an independent professional fee rather than a reduction in the vendor’s contract price. That distinction matters. However, how an institution’s external auditors assess it will depend on how the arrangement is documented and how they evaluate its substance. Auditors applying a substance-over-form analysis may still conclude that the payment represents deal consideration subject to amortization over the contract term, particularly where the link between vendor selection and the fee payment is not clearly separated from contract pricing. That outcome is not guaranteed, but it is a real possibility that institutions need to evaluate before entering into arrangements of this kind. The engagement agreement, vendor disclosure, and documentation establishing the independence of the consultant fee from the contract terms all need to be in place before the process begins. We recommend every institution discuss this structure with its external auditors in advance. CCG Catalyst applies the same standard to itself. We have reviewed this structure with our own legal and compliance advisors, and we welcome dialogue with regulators who have questions about how it operates in practice. Transparency is not just what we ask of others in this process , it is what we require of ourselves. The goal is full transparency for all parties and that includes transparency about how the accounting will be handled.

Some vendors choose alternative approaches, and a few reject the model outright, which is their prerogative. However, reluctance toward transparency is telling. While all terms are negotiable, the institutions we serve deserve partners committed to openness.

This Is Not a Novel Concept

What CCG Catalyst is doing draws on well-established models from other industries. In commercial real estate, building owners routinely pay broker fees so that tenants receive the full benefit of negotiations. Across the UK and Europe, landlords cover dual-fee structures in commercial leases. In insurance, both the US and UK, insurers pay commissions to agents, brokers, advisors, completely separate from the client’s cost of coverage. At the World Bank, winning bidders in competitive procurements declare intermediary fees as part of the standard process.

Even in bank M&A, sellers sometimes agree to reimburse certain buyer advisory costs to facilitate a deal and ensure the buyer retains the full value of the transaction. The underlying logic is the same: separate the cost of expert guidance from the deal itself, so that the party with the most to gain from a good outcome has no reason to compromise the quality of the advice they receive.

Banking has been slow to adopt this logic. Given where the industry is heading, it can no longer afford to be.

What This Means for Everyone in the Process

For banks and credit unions, the benefit is immediate and concrete. The institution retains 100 percent of any negotiated savings as well as the negotiated terms that support the bank or credit union strategy. When the structure is properly documented and reviewed with the institution’s external auditors, the vendor’s payment of the consultant fee is designed to reduce or eliminate the bank’s net consulting expense. And the institution receives independent, expert guidance without placing strain on its operating budget. This matters whether the evaluation involves a core system, a digital platform, payments infrastructure, or a fintech integration.

For vendors, the structure creates a more predictable and professional environment. Pricing is clear and separate from the advisory fee. Proposals are evaluated on their merits. The process is not designed to extract concessions. In a market where AI tools are already changing how vendors prepare responses and how institutions evaluate them, that kind of clarity is worth more than it may appear.

For advisors and consultants, this is a question of professional responsibility. Those who know me know that I am a staunch supporter of the banking industry, with decades of experience on both sides of these transactions, as a banker and as a consultant, I have seen what happens when procurement becomes adversarial. Banks and vendors need to work together. Making that relationship combative, structurally or incidentally, harms the industry and ultimately harms the communities that community and regional banks exist to serve.

An Invitation for Dialogue

I’m not claiming that CCG Catalyst has created something completely novel. However, I do believe our approach deserves to be adopted as the industry norm. This model succeeds because it relies on transparent communication and openness. If you agree, I want to hear from you. If you disagree, I want to hear that even more.

I believe most if not all of you that are reading this article would agree the procurement process in banking is overdue for change. The industry is consolidating. The vendor base is consolidating. The stakes on every technology decision are rising. The model we use to navigate those decisions needs to reflect the moment we are in.

CCG Catalyst works with community and regional banks and credit unions every day on strategies that support the institution business model, technology planning, assessments, modernization, evaluations, and contract negotiations. If your institution is working through these challenges, reach out to our team at www.ccgcatalyst.com .

By: Paul Schaus   |   Founder & Managing Partner, CCG Catalyst Consulting

Disclaimer: The views expressed in this article represent the perspective of CCG Catalyst Consulting based on our direct experience advising financial institutions and technology vendors. This commentary is intended to stimulate industry discussion and does not constitute legal, accounting, or regulatory advice.