Today in business, peer group pressure exists, and many companies are using it to their advantage. Most eCommerce retailers have peer reviews on products and even a method to ask questions to past purchasers about a particular product.  There is Yelp that, for better or worse, provides customer reviews of services. and for me most importantly, restaurant reviews.  When I travel and am in search of a restaurant, I almost always check on Yelp first.  If nothing else, I will know what to expect when I go there for dinner.  So far, I’ve not been disappointed.

For financial institutions, peer involvement, as it relates to technology service providers, has largely not been pursued.  But that is changing.  Recently, the American Bankers Association (ABA) formed a committee of 20 bankers to address concerns of their membership with the four largest technology service providers on three key issues: data access, API deployment and contract fairness.  “Concerns” is a very subtle description for the frustration I encounter from nearly every institution I am involved with.  And it has been increasing over the last several years.  Contract fairness should be an absolute concern for every institution.  Contracts have become overly precise, extremely risk adverse from the vendor’s perspective and in many cases intentionally ambiguous.  Until I point it out to our clients, some don’t even realize how clauses that have been added in previous renewals or amendments can be used against them.

Let’s all hope the ABA committee is successful and can create meaningful change.  If not across the entire industry, then let’s hope that at least some of the vendors will see that being more cooperative with their clients and prospects can become a competitive advantage and create more business opportunities.  One would think that being cooperative with long term clients renewing their contracts would be the standard.  But it is not.  I had one client during a renewal ask me rhetorically, “Why do I feel like we are the enemy?”

On a smaller scale, peer discussions at state association meetings to share your experiences openly and inquire how your peers view their vendors can be very informative.  Some experiences that I am aware of should not be kept quiet.  They need to be brought into the light of day in an open forum.  In fact, I’d like to see state associations follow in the footsteps of the ABA.  There appears to be one recent instance where state association involvement has provided positive results for their membership.

I’ve had clients that have decided not to include specific vendors in core evaluations due to their reputation (learned from peer group discussions).   Before beginning a core evaluation, talk with your peers to see what their relationship is like with their vendor(s).  If you encounter several stories of poor service, lack of trust, or broken relationships, ask yourself if your institution should expect to receive any better treatment  If not, don’t waste your time reviewing a provider that you would not consider doing business with.   I recently began a core evaluation engagement for a $270 million bank and suggested in the kickoff meeting that they begin engaging in conversations with their peers now.  Not just wait to review references contained in the RFP response.  Everything looks great in RFP responses, however when discussions occur with the vendor’s clients (and not handpicked client references), the story may be entirely different.  For most smaller community banks, the technology available is not the issue.  Being treated like a valued client is.

There is much to consider before engaging in vendor discussions. ProBank Austin can assist your bank in core evaluations or contract renewals.  If you would like to learn more about our services, contact me at sheckard@probank.com.

 

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