With increasing frequency, we are encountering financial institutions that no longer have a productive relationship with a technology vendor, primarily their core vendor. As this relationship falters, many FI leaders consider converting to a new vendor, which is neither easy nor inexpensive.

But remaining in a dysfunctional relationship is very disruptive and can prevent a financial institution from achieving its goals, which is significantly more costly. The importance of a productive FI-vendor relationship has never been greater.

Improving the effectiveness of a core vendor’s ability to service a financial institution sometimes will feel like pushing a rope but there are steps that banks can implement to enhance the relationship as much as possible – by taking control and actively managing their vendor.

Put Business First

Never forget that, while there is a personal aspect, working with your core vendor is a business relationship that is ultimately governed by the contract between the vendor and the FI. And you need to understand that agreement fully. It is your owner’s manual on how to conduct business with your vendor.

As most agreements have become needlessly complex, don’t hesitate to ask for clarifications of things that are unclear. Your vendor can help you to understand their obligations for servicing your FI and their contractual commitment to provide services. Some questions to ask yourself and your vendor about your contract:

• Are there performance standards and remedies for non-attainment?
• Has your FI monitored their performance?
• Have you discussed these standards and notification requirements with your vendor?
• Do you understand your FI’s responsibilities under the agreement?
• Do you understand the notification requirements for non-renewal?
• Do you understand your vendor’s limitation of liability?

Communicate Clearly

Defining your expectations for service, support and account management is essential, and that requires open communication. It may be determined that your FI’s expectations cannot be met, or can no longer be met, because of changes on the vendor’s end. We have seen vendors’ ability to fully service clients erode since the pandemic, so make sure you fully understand what your vendor can – and cannot – do for you. This conversation is essential.

There must be alignment between the FI’s expectations and the vendor’s ability to meet those expectations for the relationship to result in the achievement of your business goals.

Ask your vendor for best practices on how to improve your relationship and how best to inform them of issues. What is the proper escalation path? Discuss how to most effectively interface with your vendor. Procedures change from time to time; make sure your staff is following the correct and current procedures.

Meet Regularly

How often does your vendor meet with your management team? Ideally, review meetings should be held quarterly, in person. When major projects are underway, you may want to meet more frequently to keep things running smoothly.

Prepare an agenda for each meeting to review the status of all outstanding projects and cases for resolution, recap completed projects, discuss projects in process and strategize new installs. Discuss your vendor’s software development roadmap and compare it to previous roadmaps to determine progress. State clearly any dissatisfaction and follow up on it in future meetings. This meeting should be a planned event and everyone from the bank should be prepared to contribute.

Be Proactive

Get involved in user groups. Attend vendor national conferences. Talk with your peers – not only those processed by your vendor, but by other vendors too. Compare your experience to theirs. Develop a synopsis of other vendors based on their clients’ experiences and use it as a reference when assessing your vendor.

Unfortunately, technology does not run well by itself. To perform effectively, it requires that your staff and your vendor build a trusting relationship and work together to achieve the best outcomes. Don’t assume your vendor knows what your FI needs – tell them. In short, take ownership of your relationship.

While it is a shared responsibility, there is too much at stake for your FI to be passive. With the ever-declining number of charters, every vendor should strive to achieve the highest level of satisfaction at every institution, including yours.

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