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Reality Check

The future of banking is digital. Period. Hopefully we’ve progressed to a point in financial services where this statement is accepted wisdom and no longer needs to be debated.  There are reams of data that support this and nothing about the future as it is unfolding now suggests otherwise.

Another given is that all digital engagement strategies should now be “mobile first.”  From the looks of some mobile banking apps deployed today, this has not yet reached the level of accepted wisdom in our industry.

Strategic Resource Management joined more than 1,400 other attendees at Consumer Bankers Association’s CBA LIVE in Orlando, Fla. last month to discuss fresh trends and best practices in the retail banking industry. The mixture of informative programming, expert discussions and a host of networking opportunities created an atmosphere that was energetic and engaging.

It’s time the financial services industry, especially banks and credit unions, stop aspiring to be “Amazon-like” in their service delivery. While we are at it, let’s also jettison our desire to have user interfaces and experiences like those of Apple. And, just to make sure we are being completely fair, let’s add Google, PayPal, Venmo and others, to the list of those that financial institutions (FIs) should not worship as role models.

While negotiating a new vendor agreement may be the most visible part of the vendor contract management process, it’s the tedious attention to detail after the ink is dry that ensures the hard-fought cost savings materialize as promised.

This isn’t to say that service providers are looking to pull a fast one. Honest errors can (and do) occur on both ends of the agreement, probably more often than most of us would like to think. Circumstances, both internal and those dictated by market forces, also change over the life of a multi-year contract, leading to results that differ from expectations when the agreement was struck. That’s why ongoing auditing and benchmarking are essential components of any vendor contract management program.

Ideally, a good business partnership should result in a “win/win” for all parties involved. Vendor relationships are no exception. No vendor will last long if their approach is predatory toward their clients. 

In my last post, I recounted the extent to which the iPhone transformed the very notion of mobile banking. Let’s now shift the focus to catalysts for the next wave of banking innovation.

While the iPhone’s quantum leap occurred in 2007, its full impact on financial services didn’t emerge overnight because it took developers some time to leverage the opportunities this new platform enabled, and then another chunk of time for many financial institutions (FIs) and mass market consumers to embrace those capabilities. These phases were essential to making the smartphone the indispensable tool for navigating modern life, and they would be and will be repeated on rare occasions. 

As you certainly must know – unless you are returning from a long, wireless sabbatical spent in a cloister of monks sworn to silence, the iPhone recently celebrated a “big” birthday.  The device that changed most everything about banking, shopping, driving and more is 10 years old. 

Most bankers would agree that, all other things being equal, minimizing the cost of complexity is a key operational goal, which normally means consolidating around a limited number of financial services vendors. The big “gotcha” in the above statement, however, is that all other things are rarely equal, and recent industry trends reveal that other factors are at work.

In a perfect world, core banking service providers would serve as one-stop shops for ancillary products like mobile banking and remote deposit capture as well. In fact, an acquisition spree by the cores over recent years was aimed to round out their portfolios and solidify that single-source status. Recently, however, newer startups have delivered compelling enough innovations to prompt financial institutions (FIs) to expand their horizons. 

In less than a decade, the smartphone has become essential to our daily lives. Perhaps ironically, its primary function of allowing us to make a call at almost any time and anywhere has been superseded by a dizzying array of other activities it facilitates, including banking. The convenience and accessibility with the smartphone and subsequent digital devices, e.g., tablet, wearables, etc., has changed things radically for financial institutions (FIs). Today, consumers determine how, when and where they will access financial services. To say this change has complicated things for banks and credit unions is an understatement.

A study conducted by the International Association of Contract and Commercial Management (IACCM) found that poor vendor contract processes cost companies as much as nine percent of their total revenues. Although this was a cross-industry study, there is little reason to believe the financial services sector fares any better or that the picture has improved since 2015. With so much money being left on the table and the drumbeat for cost efficiencies sounding as loudly as ever, financial institutions are seeking new ways to make this area easier to manage more effectively.