For financial institutions to evolve and improve member experiences, it’s important to introduce new technologies. However, it’s important to consider new technologies from a strategic perspective as well.
Too often, FIs jump to implement the latest new feature. And organizations chase after new “shiny objects” hoping to meet the requirements of members. In the rush, FIs fail to negotiate contracts effectively and potentially cost their organizations millions of dollars during the course of a contract.
In this episode of the Digital Banking Podcast, host Josh DeTar sits down with Mike Crofts, President at vendor management consultant Maple Street, Inc., to uncover the secrets to negotiating favorable vendor contracts for your financial institution. Mike introduces key concepts in vendor negotiations, including establishing a clear understanding upfront and identifying ways to reduce costs when renewing contracts.
⚡ FIs don’t know how to negotiate or renegotiate contracts. Simply signing on the dotted line or pushing back on price alone are both recipes for failure that might wind up costing FIs millions of dollars. For many, they forget about renewing and end up locked in contracts with not just monetary losses, but with the intention of using features they’ll never actually tap into.
⚡ Buying based on a “new shiny object” is the easy way to do it, but it’s not in the best interest of the FI or those they serve. When a hot new idea or feature seems appealing, there’s too much of a jump to buy into that vendor’s promise or contract because of it. Mike says FIs need to pause and ask why first. A strategic process cuts down on pivoting too frequently for things that look or sound nice but don’t have a practical application tied to business goals.
⚡ Use an outcome statement with your vendors. While no vendor will guarantee results, when you get them on the same page at the outset of the agreement, this creates fair terms you can both reflect on when it’s time to renew. With an outcome statement in place, vendors will build more trust with their FIs when those goals are achieved, but it’s also a measuring tape for FIs to determine if they need to revisit the vendor relationship.