The coronavirus pandemic has highlighted the importance of digitalization and the ability to provide a seamless banking experience remotely, and financial institutions have accelerated their digital transformation plans in response. COVID-19 and subsequent relief efforts, including the Paycheck Protection Program (PPP), initiated a boost in spending and planning for digital transformations to navigate the pandemic and find efficiencies in their lending processes. Those moves will play important roles in preparing banks and credit unions for growth as the economy recovers. As financial institutions continue to push toward digital transformation, it’s important to consider the full roadmap of offerings and services it aims to provide and ensure that the technology vendors it chooses to partner with can support it along the way.
Collaborations between fintech and financial institutions can help institutions increase revenues, generate new offerings and new business, and enhance the borrower experience, but it can also become difficult to manage as the number of partnerships grows. There is a seemingly endless number of technologies available today, and if financial institutions jump at the first available vendor or the cheapest, it can lead to complicated – and expensive – multi-vendor relationships. Multi-vendor relationships can be beneficial for flexibility and price negotiation; they can also lead to increased complexity and hidden costs – both financially and in the form of time and resources. While larger institutions may be able to afford dedicated staff for vendor management, for smaller financial institutions, vendor management is typically one of the many hats an employee has to wear.
If an institution is reviewing third parties for technology or service, don’t just look at the initial price tag; assess potential hidden costs that might be more difficult to determine at the surface level. The following considerations can help financial institutions make more informed decisions when choosing their technology vendors.