In a new age of unpredictability within the banking industry—characterized by large bank closures and downsizing by core vendors—community banks face the challenge of mitigating risks while providing essential services to their customers. To navigate these obstacles successfully, community banks must ensure they are maximizing their vendor contracts and taking into consideration the future needs of their institutions.
The Importance of Reviewing Your Contracts Early
Reviewing your contracts early has become a necessary best practice. In the past, 18 months was more than enough time to start reviewing and discussing your needs for the next contract term. However, since the pandemic, we continue to see vendors push out their conversion dates for new customers. Because of this, we recommend you start at least 30 months out. This will give your bank more options depending on what is needed going forward.
When reviewing your vendor contracts, it is beneficial to examine three key aspects:
1. Term
Determining the contract term should align with your bank’s specific situation and requirements. If you are moving to a new solution, how soon would you like to re-negotiate? If you are renewing an existing contract, how satisfied are you with the current products and services? Are there other factors that would make you want a shorter or longer contract?
2. Conditions
Contract conditions cover crucial elements such as Service Level Agreements and Change in Control. It may seem like vendors seek to extend and complicate contracts. Therefore, it is necessary to focus on prioritizing essential items for protection and peace of mind. Identifying areas of concern helps your bank and your board feel adequately safeguarded.
3. Future Product Considerations
When was the last time you added a product to your existing contract? Was it a simple process? By proactively discussing and incorporating potential products in advance, your bank gains the advantage of a streamlined implementation process when the need arises.
Implementing Digital Solutions to Attract and Retain Customers
Technology plays a pivotal role in enhancing customer experience and satisfaction. From internet and mobile banking to debit cards—it is critical to understand and implement the latest digital solutions, as these are the main points of contact for many, if not most, of your customers.
Even though many transactions may still take place in your physical locations, the convenience and functionality of mobile banking has come to the forefront in recent years. Customers now expect seamless integration across channels, allowing them to effortlessly access their accounts, make transactions, and manage their finances anytime, anywhere.
By prioritizing integration, flexibility, and ease of use, community banks can leverage digital solutions to not only meet customer expectations but also gain a competitive advantage. Embracing digital transformation allows banks to expand their reach, improve operational efficiency, and deliver a personalized banking experience that resonates with today’s tech-savvy customers.
Handle the Ever-Changing Banking Environment with Confidence
While these actions alone won’t take away all the risk associated with vendor contracts, they can help you formulate a plan and solidify your partnerships. In an ever-changing environment, it is critical for community banks to take steps that can help reduce risk and address customer needs. Working with a trusted advisor can help ensure you’re maximizing vendor contracts and navigating the ever-changing banking environment with ease.
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