Do your core vendors have your financial institution stressed? You are not alone.
Bankers are getting tired of being coerced and mistreated by vendors who promised an honest partnership. But some bankers are beginning to conduct competitive bid projects, and are astounded by what is found in the contracts:
- Contract terms getting extended because the vendor was late in the rollout
- Purchasing products that weren’t part of the vendor’s presentation
- Vendors enforcing every schedule, exhibit, or attachment
- Cost increases at enormous rates, without vendors earning them
Leaving poor vendors seems like an easy decision, but finding prospective ones can be challenging. Building relationships with someone new, requesting simple contracts, and finding vendors that have your best interest in mind can go a long way in relieving your current stress.
Why do banks and credit unions transition from incumbent core vendors?
Staying with an incumbent vendor is trending down, especially when a FI is frustrated. While each bank has a tipping point, the decline usually starts with a lack of attention from the incumbent vendor.
Reasons a Financial Institution May Want to Leave Its Vendor
When bankers feel helpless, frustrated, and have grown intolerant of their incumbent vendor, it may be time to leave. Other reasons to get out of a poor vendor relationship include:
- Relationship managers who are not seen
- A decline in customer service
- Annual price increases that are not supported by improved services, or product developments
- Nickel and dime pricing, or misquoting estimates
- Forgetting about discounts, or the soft-dollar incentives
There is no justification to treat a long-term client poorly, which leads to financial institutions leaving their vendors. The character of a vendor is defined by how they treat customers, and what they do to make them stay.
What Can Banks and Credit Unions Do to Fight Against Vendor Poor Practices?
It is management’s responsibility to make decisions that are in the best interests of the financial institution they work for. If vendors are treating them poorly, then those managers can decide to leave that vendor.
Problems are becoming more common, but banks today are sharing their experiences with others. By using peer groups, conferences, and forums, managers can let others know of the problems of their core vendor, and get recommendations on choosing the right replacement.
Why technology decisions can save your institution lots on money
Community banks have begun reviewing vendor contracts seriously, not only because of the terms and cost, but also to remain competitive. They are digging deep to understand the trends, the cost, the processes, and the competition. Their reviews include:
- Flagging vendor overcharges and contract extensions
- Deciphering unpublished fees and de-conversion product listings
- Comparing vendors policies and technologies
By assessing vendor relationships, reviewing de-conversion experiences, and communicating those reports with other banking institutions, you can help lower the costs of your institution and others.
Tips for choosing a new core vendor
When vendors are trying to close a sale, they often make promises that they don’t necessarily intend on keeping. In order to protect your institution, follow these tips:
- Remember that a sales presentation is not a contract or a commitment from the vendor
- If the product or service is not in production, don’t count on it materializing
- If it’s important, make them prove it to you
Making vendors prove their services to you supports due diligence process, protects your organization, and eliminates the possibility of making a poor deal.
The Copper River Group
The Copper River Group is a financial consulting firm helping community banks and credit unions manage their vendor relationships, strategically negotiate contracts, and guide institutions through core conversions. We are experts in the financial industry that teach you our methodology and pass on our expertise throughout each engagement. Contact us today for questions, ask us for references, or check out our blog.
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