Financial institutions (FIs) have become more reliant on their vendors – particularly in the payments and fintech areas, where technology and complexity continually advance and customers demand newer and more cutting edge solutions. At smaller institutions where professionals are already stretched thin across a wide array of duties, it’s unrealistic to expect anyone on staff to keep track of all the latest developments in these rapidly evolving tech fields.
We have found the best way for FIs to reconcile these conflicting factors is to enlist a strategic sourcing partner who understands the landscape, someone who has seen the vendors perform in the trenches and can separate the sales pitch from reality. The key is to find an impartial advocate to engage with the partner that’s knowledgeable, yet has no agenda to pair your institution with one given product or vendor. After all, not every solution is appropriate for, or even applicable to, every FI.
Communication 101 – and Every Other Number
A great starting point is to know what questions to ask your current and potential vendors. It’s difficult to ask substantive questions if you don’t have an open, healthy line of communication. This is about as fundamental as business advice can get, but it’s remarkable how frequently such reminders are necessary. We find that the best vendors are the ones that stay in close contact with their clients throughout the relationship, not just at renewal time.
The right strategic sourcing partner can help facilitate a free flow of information during the buying process. If a vendor hasn’t addressed ongoing concerns prior to the partner’s involvement, the third party can often find themselves doing triage. The conversation does not need to be contentious – it’s often a simple matter of resolving earlier miscommunication with a smooth ongoing relationship proceeding once those lines are established. Partners that stay in contact with both the FI and client parties post-contract signing to document FI savings can continue to serve as facilitators whenever needed.
Survival of the Fittest, Protection for the Downside
In the payments space, providing your clients with best of breed solutions likely requires managing a portfolio of vendors, which can be a mix of established brands/service providers and newcomers with compelling products but shorter track records. It’s the latter group that poses special challenges. Some of these players will grow to become household names; some will be acquired by existing leaders; while others will simply fade away. Again, third-party expertise becomes invaluable helping FIs to assess the capabilities of these market entrants and to craft appropriate protections (e.g., transfer of application code) should circumstances change.
Banks and credit unions also face increasing vendor due diligence requirements in order to meet the mandates of both regulators and their own boards. The criteria can be multi-faceted, ranging from general business certifications to privacy safeguards, cyber security and vendor financial viability. This is yet another area where a knowledgeable strategic sourcing partner can ensure the FI has considered all aspects of a constantly changing rulebook.