The Bottom Line

Every institution wants its various processes and practices to be best of breed. Most, at minimum, want to know how they stack up against the best in their business. Typically, peer groups are established for this purpose, usually based on a bank or credit union’s asset base.

However, there are countless reasons why the performance of two financial institutions of identical size may not warrant side-by-side comparison. For example, one institution using a service bureau for core processing will have a lower efficiency ratio than one of its peers that does not use one. The retail/corporate mix within loan portfolios will also give rise to operational differences.

A debate has raged for some time as to whether fintech companies are friends or foes to financial institutions. In our view, the question itself is a cynical oversimplification of the situation. While there are some aggressive startups intent on stealing business from financial institutions, there are more fintechs that want to partner with banks and credit unions to help them modernize their service offerings.

The most recent installment of our ongoing series of SRM Academy papers focused on the digital transformation at financial institutions. The latest installment explores the potential of biometrics – voice recognition and authentication in particular –to improve digital banking while also leveling the competitive field for regional and community institutions.

Fall has arrived and the holidays will be here before we know it. What this means for many of us is that Q3 is closing and budget priorities for 2019 are being finalized. In the spirit of this special time of year, SRM wants to revisit a few vendor contract management reminders that may be useful to you at this time.

These tips are not only useful during budget season when the hunt for savings that can be used to fund other initiatives is vital. They can also help you add value to your institution throughout the year. In fact, vendor performance management should be a year-round discipline. We know now that finding ways to reduce costs or enhance revenues can be particularly important.

Most financial institutions are moving into the heart of budget season, which offers a great opportunity to take a step back and assess business priorities. In many cases, however, budget planning also carries a heavy dose of frustration. As I came to call it over my years in the industry, Doctor No takes up residence in the office – putting the kibosh on a variety of worthwhile and aspirational projects.

Department heads realize that no budget will have room to fund every project, and good managers find ways to free up enough dollars to pursue a select group of long-term initiatives alongside the “keep the lights on” necessities. Nonetheless, by the time the process is complete, it inevitably seems like the belt-tightening has squeezed out too many of the promising ideas.    

Before joining SRM, I worked almost exclusively with the top 50 U.S. banks, helping them with strategic sourcing decisions and vendor contract negotiations. Since coming to work for SRM though, I’ve been exposed to a broader array of sizes and types of institutions, spanning both the 150 financial institutions exceeding $10 billion in assets as well as the 12,000 banks and credit unions with assets below $10 billion. Given this perspective, it is not difficult to notice the many differences between the national and regional institutions versus those who operate in the community market. In the realm of vendor management, these differences manifest in three distinct ways.  

Despite several well-publicized bumps in the road, the U.S. migration to EMV-based chip cards has undeniably reduced payment fraud at the physical point of sale. That’s the good news. On the flipside, increasing fraud rates in the rapidly growing card not present (CNP) channel have the potential to more than offset gains in card present (CP), perpetuating an overall upward trend in card fraud.

The one constant across my nearly 20 years in the payments business is that things have never stood still long enough to get boring. Starting with the days when consumers’ only payment options were cash, checks and house credit (okay, that was a lot more than 20 years ago), merchants and financial services innovators have continued to add new payments alternatives at a dizzying pace. And just as importantly, they haven’t retired any.

The Fed recently issued a report detailing average debit card interchange fees by payment card network. I know, it’s like Christmas in August, but try to contain your excitement. Joking aside, payment geeks like me find endless insights pouring over the details and footnotes of this annual publication. We regularly share these reports with our clients, and suggest they keep the information at their fingertips.

Philanthropy is an important part of SRM’s own mission. We believe in giving back and we know that a number of our clients feel the same way.  That is why we decided to co-host an event that recently took place in scenic Seward, Alaska. It was an educational program, Earning Your Independence, and joining us as co-host were investment advisors, Performance Trust. The goal of the program was to bring together executives who were interested in education, adventure, networking and raising money for the Children’s Miracle Network.