As more financial institutions get serious about modernizing their core systems and revisiting opportunities surrounding contactless cards, our firm has noticed an uptick in the volume of requests for proposals (RFPs) issued as part of the vendor management process. SRM sees this as a positive development. In fact, we generally recommend that financial institutions regularly subject all their supplier relationships to an RFP process.
To some extent, this is a simple matter of due diligence and financial prudence, though it requires a high degree of advanced planning. Realistically, swapping out service providers can require an 18-24 month lead time and can be a resource-consuming undertaking. Nonetheless, a robust fact-gathering process is almost always a valuable and worthwhile exercise.
Knowing What You Don’t Know and Not Wasting Anyone’s Time
The meaning of “state-of-the-art” has changed dramatically over the past few years in areas like mobile banking, payments, AI, and ITMs. Unless the bank or credit union has a resource dedicated to tracking industry developments, any institution with a long-term incumbent provider likely has an outdated perspective on the prevailing landscape. An RFP is a great tool for getting up to speed on what is out there and what it might (or should) cost.
A common mindset that inspires concern is when we hear a financial institution say that they are almost 100% certain they’ll renew with their current provider, and as such, are worried that issuing an RFP would waste everyone’s time. From the standpoint of a bank or credit union, it is always time well spent to educate yourself on the available options and functionality you may be competing against in the immediate future. Besides, without a complete view of the marketplace, it’s difficult to be absolutely certain that standing pat is best. Who’s to say a market assessment won’t reveal new info that might change your perspective?
Some conscientious credit unions and banks are also reluctant to waste vendors’ time chasing long shots. In our experience, this should not be a concern. Many vendors have told us that as long as a financial institution is forthright regarding its intentions, they welcome the opportunity to establish a dialogue and open doors. As one service provider put it, “We just want a seat at the table, so we can establish relationship that could lead to future opportunities.” After all, the vendors benefit from this educational back-and-forth as well as the bank or credit union.
Have Someone Help Do Your Bidding
Of course, conducting a full-scale RFP entails a significant commitment of time and effort, spanning multiple departments, however RFPs can be designed for varying degrees of rigor. A word of caution - although those without active plans to switch vendors may choose to scale back their requests, financial institutions should take care not to make them too skinny. A barebones RFI (Request for Information) probably won’t generate the desired level of industry learning. On the other hand, we have found that with the right benchmarking knowledge, a brief look at the FIs data by an experienced person could simplify the whole process, even before issuing a single RFP.
Even the regional and national financial institutions who have dedicated divisions to procurement and RFP management can benefit from opening a dialogue with partnered experts, especially for critical but seldom negotiated services. In fact, we have seen time and time again that a fresh pair of eyes with the right domain expertise can quickly pin-point exactly where opportunities exist, whether that’s a better solution, more insightful contractual terms, or simply a clearer view of the market landscape.
The bottom line is that a financial institution will never know its range of possibilities until it talks to someone, and then gets (at least) a second opinion.