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The Bottom Line

In our last blog post, I recounted the industry changes that SRM has witnessed – and in some cases helped drive­­ — since opening our doors 25 years ago. As a follow up, I’d like to highlight a key principle that hasn’t changed since 1992, one that has enabled us to successfully deliver more than $2 billion in savings – and counting – to our financial institution (FI) customers.

In August, SRM marked its 25th year of providing organizations with the experience and information required to optimize their contractual relationships with vendors. Although we’re far more focused on serving our clients in the present and expanding the reach of our expertise in the future than we are on our past accomplishments, it’s gratifying to be reminded of the positive impacts we have delivered to our customers over the time we have been in operation.

While much of the attention paid to regulatory requirements for financial institutions (FIs) tends to focus on Dodd-Frank and mandates issued by the Consumer Financial Protection Bureau, a notable change of late has been the heightened requirement for vendor management oversight and third-party risk assessments. Although the Bank Service Company Act is hardly new, it has recently become the basis for these types of mandates. Powered by different agencies, the message is essentially the same: When it comes to vendors, the buck stops with the FI. In fact, the FDIC requires that it be notified within 30 days of any new service provider relationship being struck.

It’s no secret that our industry is littered with acronyms and jargon Most of the time it is used as a type of helpful shorthand. Even so, an outsider overhearing a conversation incorporating some of this “industry speak” might believe those of us in financial services speak an entirely different language. The truth is sometimes those of us in the industry struggle to translate the latest term or buzz word correctly. 

While the vendor contract negotiation exercise does not need to be an adversarial one, the chances for a happy outcome are increased when both parties feel they are being treated fairly. In fact, that is the goal of most vendors and financial institutions (FIs) we have worked with. After all, vendors have no future without FIs and FIs have not future without vendors. It is in everyone’s best interest to work toward a deal that meets the needs of all the parties around the table.

SRM recently reached out to several dozen credit union clients to better understand their priorities for the next 12 months, including new product rollouts to address areas of greatest interest to members. Their responses cover a wide area, which isn’t surprising given the unique client segments being served. Nonetheless, certain trends clearly emerge.   

Replacing a bank or credit union’s core system is not a decision to be taken lightly. A conversion to a new software provider can easily take more than a year in a best case.  These projects have often been compared to a heart transplant – very expensive, high risk and resource intensive. They also usually consume IT bandwidth that is needed to respond to a litany of business priorities such as the front office channels, products and services consumers depend on daily.

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. 

Just the phrase, “The Durbin Amendment” is enough to drive some less reserved bankers to punch a wall, scream out a window, or initiate whatever coping mechanism helps them most effectively blow off steam. While the mere mention of this law, at a minimum, elevates the blood pressure of those responsible for managing banks and credit unions, these executives recognize that the sensible approach to Durbin is to find ways to thrive within its constraints.