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The negotiation process for expiring vendor contracts at a financial institution (FI) often poses unique challenges. For example, those that have an existing relationship with the incumbent supplier need that relationship to remain constructive, especially since it will be ongoing once the contract is signed.  This can prove particularly difficult when negotiating topics like pricing must be addressed.

In the weeks preceding last November’s US election, bankers spoke of finding ways to apply common-sense tweaks to the edges of onerous regulations like the Dodd-Frank bill. A few short months later, talk has shifted to an outright repeal of the Durbin Amendment, if not of Dodd-Frank itself. We had expected such efforts to gather steam over the next 90-120 days. However, the general pace of reform has been slow, which will likely mean attempts to streamline Dodd-Frank may not begin this soon. 

The typical financial institution has dozens of contracts in place with numerous vendors that support its operations (both customer-facing and internal). As a result, staying on top of the expiration dates for all of those agreements to maintain an effective renewal process can present a significant challenge. At a minimum, doing so is simply best practice, but in other cases, such due diligence may also be a regulatory requirement or a board mandate. 

For all the banking executives that oversee vendor relationships, see if this scenario seems familiar: A long-time vendor visits your institution and, out of the blue, offers a contract extension along with attractive incentives; e.g., signing bonuses, rebates, pricing discounts, etc. To date, you’ve enjoyed a solid relationship with this partner with no plans to break the contract at expiration, so this provides an opportunity to look like a hero to your institution, bringing in an unexpected windfall to fund other priorities. What could be the downside?