“Times they are a-changin’!”

Bob Dylan was prophetic in his ‘60s musical description of change. Just as we go through a cycle and grow comfortable, things change again.

The last 15 years or so, the core vendor market has been very stable. The majority of my firm’s vendor review work at the core level has comprised contract renewals.

Of course, competitive bidding has been part of the renewal process. But when it comes to pulling the trigger the management teams of these institutions have been very reluctant to convert, electing to stay with their current processor.

But starting in 2014 we began to see vendor core application stability changing dramatically!

Being held back by providers

Community financial institutions confronted with the growing technology demands of digital natives and millennials are growing intolerant of vendors that play hardball with their technology options.

Community bankers want to compete, but selecting a product solution that is not part of a core vendor’s product family has been met with stiff resistance from that vendor.

The most common response today, when a community bank wants to select a product outside a core vendor’s product family, is an flock of fees: interface fee, annual maintenance fee, transaction fee. Alternatively the vendor produces a combination cost quote that is financially outrageous.

Sometimes the vendor flatly refuses to allow integration

Whichever tactic the vendor takes, besides cooperation, may be protecting its short-term revenue picture, but in the long run it spells the beginning of the end of a relationship.

Banks need partnerships

Banks can’t afford noncooperation anymore. Digital Natives and Millennials are not only intolerant of bad service, but will change financial institutions in a flash if they are dissatisfied. When in a leadership position, they also hate to be told what to do, particularly by a vendor.

The result is that they feel marginalized, not taken seriously, or taken advantage of. Consequently, the client takes it personally when a vendor tells them “no” or insults their intelligence by proposing an unreasonable fee.

Conversions can be disruptive. Going through a core conversion or other major application change in the past was to be avoided at all costs. But not anymore. Ten years ago conversions were a major institution-resource-consuming endeavor, but in the world of contemporary project management, that’s no longer the case.

More importantly, today’s management teams will not be intimidated by vendors that respond with ridiculous cost quotes or blatant inflexibility. When confronted with challenges, they are confident, driven, and willing to crush the status quo in order to compete.

Stakes too high for dithering

The internet has leveled the playing field by providing community banks the means to compete. On the other hand, the internet can also be unforgiving and punishing by exposing institutions that do not offer contemporary and competitive products and services.

Our research has identified that community banks waited too long to respond to the large banks and their technology-based products, and are now beginning to feel the competitive heat. However, community financial institutions are in a unique position to make real advancements.

9 reasons bankers now say goodbye

Over the last 18 months, we have observed community bankers establishing confidential strategic technology plans focusing on departure strategies in response to vendor edicts.

The reasons are simple:

1. Spread too thin. Relationship managers that have too many customers and not enough time.

2. Blame game. Increased customer service issues and too much finger pointing by the vendor.

3. Too long too little. Months to implement simple products that do not work.

4. Movement without action. Product proposals that take an act of Congress to revise.

5. “It fits perfectly!” Products and applications are not cost effective or efficient even though the vendors sell the concept that they are fully integrated.

6. Fee, fee, fee. Incremental pricing for everything.

7. “Do it my way, or do it my way.” Vendors dictating product technology options through ridiculous pricing.

8. “I’ve already got your business.” New customers that receive better service and faster response times than existing customers.

9. “Not from here.” Refusal to integrate nonvendor family products.

Community bank executives understand that customers will hold them accountable for the competitive performance of the institution, and the vendor escapes unscathed. Furthermore, tomorrow is today and maintaining the status quo will no longer suffice.

The bankers understand the words of Bob Dylan: If you don’t start swimming you’ll sink like a stone for the times they are a changing.

Vendors must buoy, not anchor, customer banks

The motivation is being driven by the compelling realization that staying with their current vendor and their prevailing relationship attitude represents a boat anchor necklace that will take their financial institution straight to the bottom.

Finally, we have a question for you:

Is your current vendor telling you what you can do?

If the answer is “yes,” then we suggest that you to have a conversation about your vendor and recognize that the times they are a changin’.

—The Wombat!