One of the notable trends to watch out for in 2020 is that financial institutions are becoming more and more comfortable partnering with fintechs, rather than seeing them as competition. Indeed, to keep pace with the tech innovations driving our society, banks and credit unions wishing to attract and retain consumers must do business with an ever-growing number of vendors – many at various stages of development corporately. This fact of life in the digital age has led to a proliferation of contract types and terms.
Effectively navigating these complexities to ensure that a financial institution signs with a vendor with terms fair to both parties has become increasingly difficult. Having the subject matter, technological and negotiating expertise to reach such a desired goal in current times would require focusing full-time just on the information needed to stay current at the highest level, never mind learning the nuances that shape the important detail that determines the end product.
Consistently, these conditions lead to a knowledge gap within banks and credit unions when it comes to industry benchmark data and the formulas necessary to apply those benchmarks to a particular type of vendor. With these two ingredients missing, the chance of signing a contract “in market” can be very low.
To quote one of the leading executives in vendor optimization in financial services, “On an average day, the landscape between a financial institution and its vendors are seldom fair and balanced. Vendors hold some very powerful cards – they negotiate for a living, know their contracts’ ins and outs at a level no outsider can, and understand their ‘space’ at an expert level. Without the basic tools, typically vendors walk out the victors in most negotiations.”
Our SRM Europe colleagues address this challenge and recommend questions all organizations should ask to get a handle on their vendor contract management efforts. Take a look: