10


NEWS


Banks and credit unions squeezing longer contracts out of vendors


T


he growing complexity of vendor relationships and the drive to continually improve bottom-line results is creating 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 ensure maximum leverage, says research firm SRM, and allow financial institutions to lock in today’s pricing and terms ahead of inflation and other forces that may emerge in the future, particularly such as fast-moving one as finance is set to stay in 2018.


Some vendors are offering significant discounts for extended term contracts. Institutions with vendor relationships that have served them well will continue to utilise this option to gain access to the more favourable 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 a brand footprint.


The digital revolution spawns vendors I


nnovation 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.


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 optimise their debit and credit card portfolios in this digital-first world, meaning traditional penetration, activation and use (PAU)


Old dogs, new tricks S


ystems that have been part of banking almost since its inception will continue to be important areas of focus in 2018. Financial institutions will spend considerable time and money in the next 12 months looking at ways to modernise them. This will make core processing, payments processing, loan origination and CRM, along with a few others, areas to watch because they will gradually start to change.


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 and suppliers – 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.


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.


campaigns will need to be mobile first as well.


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.


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. However, the prognosis for this, as usual, looks poor.


www.ibsintelligence.com | © IBS Intelligence 2018


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