MEMPHIS, Tenn., Nov. 29, 2017 – SRM (Strategic Resource Management), a leading independent contract advisory firm for financial institutions, has shared its predictions concerning how trends in vendor contract negotiations will impact banks and credit unions in 2018. Understanding these trends can help financial institutions identify opportunities for cost savings and revenue enhancements as they address contract expirations and technology upgrades in the coming year.
Over its more than 25 years of working with banks and credit unions to improve the outcome for them when negotiating contracts, SRM has amassed a proprietary set of data that it updates in near real time to determine what dynamics in the market may impact clients in the short and long term. The information derived from this data not only covers present trends in pricing, terms and conditions for vendors in various parts of the industry, but also gives SRM a historical perspective concerning macro trends.
Brad Downs, CEO of SRM, commented, “There are more vendors today than yesterday and there will be more vendors tomorrow than today. The contracts these vendors are introducing into the market feature an increasing level of sophistication as each jockeys for a competitive advantage. Financial institution executives and managers too often have to sacrifice other equally important responsibilities to have the time to consider the growing complexity in these contracts and have comparative data that is very limited in most instances. SRM does this for a living, and utilizes the experience we have and the information we gather to deliver bottom line value to our clients.”
Bottom Line Boosters
- Sooner Rather Than Later. The growing complexity of vendor relationships and the drive to continually improve bottom line results will create pressure for banks and credit unions to become more diligent in monitoring the various time sensitive aspects of their supplier contracts in 2018. Keeping track of the basic triggers within the contracts for auto-renewal, expiry date, notification of intent to terminate, etc. will insure maximum leverage and allow financial institutions to lock in today’s pricing and terms ahead of inflation and other forces that may emerge in the future.
- Going Long. Some vendors are offering significant discounts for extended term contracts. Institutions with vendor relationships that have served them well will continue to utilize this option to gain access to the more favorable pricing and terms being offered for these longer commitments. In 2018, cards will continue to represent one area where longer terms are yielding benefits to financial institutions as card companies battle for brand footprint.
- The Digital Revolution. Innovation in digital banking will continue to drive an increase in vendors in this space in 2018. Banks and credit unions will find themselves working with smaller companies that have expertise in this area and struggling to determine how to best evaluate their options. Negotiating for the win/win arrangement will be made more difficult given the entrance of these new companies, technologies and pricing options.
Technologies to Review
- Not Mobile Only, But Mobile First. Increasingly, consumers are making purchases, paying bills, transferring money and checking their balances on their smartphones and tablets. Banks and credit unions need to be thinking about how to optimize their debit and credit card portfolios in this digital first world, meaning traditional penetration, activation and use (PAU) campaigns will need to be mobile first as well.
- Old Dogs, New Tricks. Systems that have been part of banking almost since its inception will continue to be important areas of focus in 2018. Financial institutions may spend considerable time and money in the next 12 months looking at ways to modernize them. This will make core processing, payments processing, loan origination and CRM, along with a few others, areas to watch.
- The Branch Is Not Dead, Just Different. The review of branch strategies will intensify in the coming months, meaning more branches will be closed or kept open but given technology upgrades. Institutions will find themselves selecting and negotiating with vendors – some old and some new – who provide the new branch technology required to make branches less resource intensive. The need for data specific to the pricing and terms in this emerging area will proportionately increase as well.
Roadblocks to Progress
- Ongoing Consolidation. Mergers and acquisitions (M&A) could delay IT initiatives in 2018 as financial institutions focus on completing these deals and integrating the respective operations. An increasing number of financial institutions will be looking for ways to decrease these types of impacts by isolating their day-to-day operations from the distractions created by M&A activity. The incorporation of industry-savvy partners to help them sort out various elements of these acquisitions, including contracts with critical vendors, will be one of the options they will use to achieve this.
- Security, Fraud and Other Monsters. Growing data security requirements and breaches will remain a material concern for banks and credit unions in 2018. To combat these eventualities, most institutions will make large investments in the areas of cybersecurity, fraud mitigation and enhanced authentication. Emerging technology in fraud prevention, card control and biometrics will be followed by others to make this area as dynamic as payments and digital banking.
Downs adds, “Despite the number of changes going on in this industry, we want banks and credit unions to understand the position and leverage they can have to negotiate contracts that work well in their favor, and to the benefit of stakeholders, while still maintaining a really positive relationship with their solution providers. The most important advice we can pass along to any financial institution is to review contracts often and begin the negotiations well ahead of the auto-renewal or intention to terminate. These best practices transcend any market cycle or new technology that may emerge.”
SRM (Strategic Resource Management) has been trusted by more than 700 financial institutions to identify cost savings and new revenue potential in their contract relationships. Over its 25-year history, SRM has earned a reputation for vendor neutrality and financial responsibility. Using a proprietary database of industry contracts and pricing, its thousands of performance-based engagements span many distinct contract areas and have saved its clients billions of dollars. Visit www.srmcorp.com for more information and follow the company @SRMCorp.