The payments ecosystem continues to expand rapidly as new innovators and technologies disrupt the market. Effectively evaluating and managing vendor relationships has become a growing challenge for banks. This can be especially true for community and regional banks who rely heavily on their vendors to provide industry education and product direction. These banks face increasing pressure from economic uncertainty, rising competition and strained resources. Focusing on products and services that improve business payments and processes can be a great strategy for a bank to grow non-interest income and stay competitive. Finding, selecting and ongoing management of the right partners is critical for executing on this strategy.
Together with their partners, banks can merge their traditional banking models while embracing innovative solutions for their clients. This requires that bank leaders stop looking at their partners as just vendors and embrace the relationship as an actual partnership. If banks treat these relationships as one-way transactions, they are missing out on a valuable opportunity to gain back some competitive advantage and market share.
In parallel, financial services providers and fintechs have to understand how community and regional banks work to understand how they can best serve the partnership. It is not enough to have the best, slickest technology. In a recent survey of executives from small to mid-sized banks and credit unions, 69% report fintech partner onboarding as somewhat or a significant challenge*. Successfully executing the vision and building a true partnership is the only way to bring these industry leading technologies to banks and their clients.
Banks that invest the time and effort into a collaborative partnership with their payment vendors can create a strategic advantage in an increasingly competitive environment. This approach goes beyond due diligence and risk management with a vendor. Many banks overlook the importance of their strategic partnerships and we have seen products fail because of it.
Here are three tips in building long-term, mutually beneficial partnerships while delivering competitive, innovative solutions to your customers.
1. Set Mutually Beneficial Goals and Pricing
Setting up a quarterly business review for primary vendors is a great first step. This can help you and your team have strategic level discussions with your vendor, so they understand your goals and program objectives. If you are in the process of contracting a new vendor or renegotiation, work to align pricing and incentives that are mutually beneficial. For example, understand your primary expense indicators and create tiers to reduce fees as you grow your program. This creates a win-win for you to reduce your expenses as your program grows and your vendor has an engaged customer that is directly incentivized to grow the program. The cheapest price is not always the best option. Especially for community and regional banks who need more support. Even outside of contract negotiations, this strategic discussion can happen at any time to springboard a more valuable partnership.
2. Create Rules of Engagement Together
To complement mutually beneficial goals and pricing, creating rules of engagement with your partners will help set you both up for success. Determining effective meeting cadence, agendas and attendees is the first step. We recommend limiting the meetings to only the necessary participants. Banks are notorious for having meeting after meeting, which leaves team members fatigued and disengaged. Especially for virtual meetings, limit the attendees on both sides to have a more engaged and valuable discussion. Rules of engagement should also be set and documented for issue escalation and SLA's, as well as sales process and success metrics. Having clear expectations between parties in these areas will set the partnership up for long-term success. This may seem like an obvious one, but we have seen time and time again lack of clarity around rules of engagement strain or even destroy a partnership. This can also lead to wasted time and effort, as well as loss of trust with the sales team and even clients. Many times the success or failure of a product hinges on the strength of the relationship between the bank and their vendor.
3. Dedicate Internal Champions
For a partnership to be successful, the bank needs to dedicate an internal program champion. This may be someone from product, sales, operations or leadership. The champion is someone that is highly engaged in the solution provided and delivering it successfully to bank clients, as well as an influencer within their Bank. The program champion should be involved in giving feedback to the partner and participate in conferences or advisory councils that the provider facilitates. This champion helps the partner better understand the organizational strategy, chain of command and decision process, ensuring that sales of additional products and services align with Bank needs. The bank benefits because they have an internal resource that understands the broader partnership and can help deliver unique solutions for their specific bank. Even if you are a small fish in the vendor's big pond, if you have a dedicated champion the vendor is more likely to work with you and get creative in their offering to fit your needs. The program champion is the person who knows who to call if something goes wrong or the partnership starts to get off track. Inevitably something will go wrong, investing in a strong relationship between parties is crucial for long-term success.
It has never been a more exciting time to be in financial services and payments! Taking a strategic partnership approach allows banks to take advantage of all the exciting innovation and bring valuable solutions to their clients. This approach is a core part of our philosophy at Scale Advisory Services. Every organization is unique, and we would love to work with your organization to better understand your needs and help you build a custom strategic partnership approach that will increase value and revenue to your bank. Contact Scale Advisory Services today.
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