By Rick Hall, Managing Director, Banking and Financial Services, BKM Marketing
Vetting and validating new technology vendors often falls to bankers and marketers who may lack the technical expertise needed to thoroughly understand the presented technology, including whether it will provide the best solution for the bank’s specific needs. It’s easy to overlook red flags and grasp at what might seem like a simple solution.
These bankers and marketers must take a step back and consider the bank’s needs and goals across a variety of business lines and customer segments. They must learn to shrewdly and strategically select software vendors, especially as today’s bank marketing technology is littered with more products, solutions, and silver-bullet promises than ever before.
If you’re thinking, “Easier said than done,” you’re not alone. Most bankers and marketers are not technology experts or risk managers by training, so deciphering what’s said and written about software and how it translates to business needs isn’t exactly intuitive.
9 questions to ask software vendors
Asking these questions will instill confidence in investment choices and ensure no time is wasted on vendors that will ultimately yield a dead-end or failed project.
- How long has the company been in business and provided the offering you’re considering?
Banks want to deliver on their strategy, compete effectively, and grow. Investing in new tech tools is the way to go, but the speed of technology requires a due diligence process for new vendors. Unlike other vendor validation criteria, it’s not realistic to require tech vendors to have a years-long track record. Learn to think in months, not years. Vendors should be able to demonstrate a steady focus during that time versus impulsively following the whims of the market.
- Does the solution directly interface with your current core system in real time, or does it rely on APIs?
Viable marketing solutions should be real-time or close to it. You don’t want to market a mortgage offer to a potential customer 60 days after that customer hit the radar or create rate exposure from an offer term — you will never land these opportunities.
Effective technology integrates across the enterprise. A recent Bank Director “Technology Survey” found that 68% of banks rely on their core to introduce application programming interfaces (APIs, which basically allow two software applications to talk to each other). But only 21% are happy with their core provider.
There is plenty of other research that supports similar conclusions. The result is that many banks make do with a patchwork of technology solutions rather than an integrated, seamless whole. To avoid this, bank marketers must work with internal IT teams to understand how the promises of real time or APIs will actually work in the bank’s environment.
- How does the solution address data security and management?
Understanding the fundamentals of data security is essential when selecting technology vendors. Although there are plenty of use cases for establishing how partners should handle customer data, the reality is that even after handing data over, the bank is still on the line for any misuse of data or security missteps.
Data management is equally important. The state of bank data varies greatly from one institution to the next, with very few regularly normalizing, cleaning, and leveraging data to ensure programs have the greatest chance of success. If tech vendors don’t ask about current data management practices, they might be unable to deliver on promises to utilize data for acquisition or cross-sell programs.
- How many active installations of the solution are in the market today? What are the asset ranges of banks using it?
Banks today face a dilemma. Many rely on their core provider to introduce new solutions, yet core providers have demonstrated a lack of capacity to pursue innovation. Smaller banks have reported unfavorable contracts with core providers, which has hampered their ability to compete with bigger firms. The decision to work with current providers or seek new partners is not something to take lightly.
For many banks, they have no choice but to explore new options to continue moving forward. A significant gap between a bank’s size and others using the proposed solution might be a red flag. But the answer to this question of asset ranges must be weighed against other data collected from the tech vendor. The answer might not be ideal, but it’s not necessarily a deal breaker, either.
- What are the background qualifications of the vendor’s leaders? Are they chasing investment?
The relevancy of leadership for any technology cannot be overstated. For instance, if the CEO of a vendor came from a core provider that is now a primary source of funding and leads for the vendor, a bank might want to proceed with caution. The vendor needs banks for revenue, and that revenue could be a play for greater investment. In 2018, payment startups earned nearly a quarter of fintech financing.
In other words, bank marketers must make sure the message they’re hearing matches the story investors are being fed. Backgrounds, vision, and results matter, and it is not the bank’s problem that the vendor is looking for another round of capital infusion.
- Does the vendor have staff members with relevant financial industry experience or expertise? If so, what roles do they play in the company?
It’s essential to understand who is behind the solution and whether these people can be trusted to understand a bank’s unique needs. It’s also important to consider whether the relationship will be an easy, fruitful collaboration or one-sided.
I was once considered as a potential influencer for an onboarding solution. During the pitch, the solution rep spoke to me as if I hadn’t been in the industry for decades. She was more interested in speaking than listening and never asked me what I thought — a definite red flag.
- How does the vendor define any terms that seem like buzzwords?
Watch out for buzzwords during a sales pitch — or, as a panelist at a recent fintech gathering referred to it, “buzzword purgatory.” A bank’s understanding of the term may vary from the vendor’s. It’s important to pause whenever buzzwords come up and make sure everyone is on the same page.
Also, just because an idea is cool and has a lot of popular clout doesn’t mean that solution is the best fit or a relevant option for your bank’s needs. For example, if the objective is to reduce the cost of deposit operations by 10%, artificial intelligence might sound like a great idea but probably isn’t the ideal way to realize that goal. In fact, the same Bank Director survey found that very few institutions with less than $10 billion in assets have a willingness or a strategy to handle these kinds of advanced tech solutions.
- Can the vendor’s claims around buzzwords be validated, or is it using those terms to appear aligned with the latest industry media coverage?
Some firms think they need to use terms such as machine learning in their sales pitches, but a little digging reveals they don’t actually have any capabilities in machine learning. Shocking, I know, but this is another red flag. These firms are throwing around terms to seem like a viable solution, but it’s all smoke and mirrors. To avoid this, trust but verify any claims, and pay extra attention when the firm has jumped to trendy features or tries too hard to appear cutting-edge.
- Does the vendor truly understand the bank’s pain points?
If a vendor quickly moves the discussion to the solution’s benefits and skims over the bank and its needs, pay attention. In the same Bank Director study, 60% of banks said that core providers can’t address the need to implement new solutions.
It’s essential to get really clear on defining the bank’s markets, the problem the solution would address, and how the technology would leverage data to get there. If vendors have no interest in these details, they can’t possibly deliver what is needed.
Technology solutions require a sizable investment. Bank marketers must ask hard questions and demand thorough, direct answers to ensure they are spending wisely. There are plenty of products out there, but there is no reason banks should suffer with anything that is less than a perfect fit.