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But I Really Like My Technology Vendor!

fintech vendors

Gonzo

July 21, 2021

How a lot are you prepared to pay to be chummy together with your answer supplier?

In a current survey of banks and credit score unions about their expertise vendor contracts, Cornerstone Advisors discovered that greater than half of those monetary establishments enable emotional components to affect their negotiation processes. And it’s costing them cash.

We’ve negotiated sufficient contracts to know why this occurs. Generally an FI shares mutual admiration and belief with its vendor rep. Or perhaps the seller delivered a really helpful product and supplies stellar service, and the establishment doesn’t wish to jeopardize that relationship. The truth is, optimistic experiences should not have to equal free passes for the seller.

Know-how Vendor Financials Inform the Story

We’ve seen how distributors bemoan the scrutiny on their publicly traded inventory as a cause to carry agency on pricing or complain that they’ll’t afford to barter worth resulting from their excessive dedication to analysis and growth (R&D). Bankers, there’s no have to really feel sorry for the expertise distributors that serve your market. They’re doing simply high-quality.

A comparability of the five-year inventory efficiency of the Huge 3 monetary expertise corporations (FIS, Fiserv, and Jack Henry) to the KBW and QABA indices (each benchmark inventory indices of the banking sector) illustrates that the Huge 3 have been delivering a lot greater and extra steady inventory worth progress than banks — by a big margin. Monetary establishments ought to take into consideration this earlier than deciding to let contract pricing go unnegotiated.

A comparability of the relative quantity of R&D spending at Huge 3 versus different well-known expertise suppliers paints a daunting image for monetary establishments which can be counting on Huge 3 distributors to steer their expertise innovation.

A phrase of recommendation for monetary establishments: Subsequent time you’re pondering to permit a contract to auto-renew or signal a contract with out worth discussions, keep in mind how the Huge 3’s shares are outperforming financial institution shares and the way the distributors are under-investing in R&D.

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Seizing the Upper Hand in Contract Negotiations

This put up is excerpted from Seizing the Higher Hand in Contract Negotiations, a brand new white paper from Cornerstone Advisors.

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