After more than 12 years helping banks and credit unions optimize their service contracts through expert negotiations with vendors, I have picked up a number of secrets that have empowered JMFA clients across the nation to take the reins and experience substantial savings on their vendor agreements. Today, I’d like to share with you a few tips to help you get the best deal from your service providers.
Secret #1: Humility can equal significant savings.
What I’ve found over the years is that there’s so much changing in the marketplace with technology contracts (like core processing, Internet banking, custom bill pay and debit cards), that even those adept at negotiating in other situations may not have the information they need to negotiate with these types of vendors.
There are a lot of different line items that can be negotiated within a certain contract. But unless you do this all the time (like we do at JMFA), you probably won’t know what to ask for on each line item, what concessions can be made, or what line items are strictly pass-through costs that can’t be negotiated, regardless of the vendor.
Once we run the numbers, people who think they did a really good job negotiating their contract five years ago realize they could have actually saved a lot more. But, they couldn’t have known that, because they don’t have a comprehensive an up-to-date database like we do.
Secret #2: Be realistic about how long the process takes—and plan ahead.
Give yourself plenty of time to work through the entire contract review process—you’re easily looking at 4-6 months, and sometimes even longer with a large contract like core processing or card processing.
I can’t say it enough: you must plan ahead, about 18-24 months from the contract expiration date you really need to start evaluating the contract. Trying to get a good deal 6 months before your contract expires doesn’t give you enough time to evaluate all your options, and you risk getting backed into a corner with less bargaining power. Additionally, if the contract includes a non-renewal you will probably miss the deadline.
Secret #3: Don’t be afraid to consider other vendors.
Look at other providers. Don’t get complacent and comfortable. What you could be missing out on are significant savings, discounts and even marketing assistance. As tech advances, the marketplace is changing rapidly, especially with mergers. You don’t want to get stuck on the same path just because you’re afraid of change.
There’s a lot of competition in the marketplace, and I think a lot of institutions aren’t fully aware of who is out there, especially if they’ve been with the same provider for 10 to 15 years. Don’t be afraid to put the service out to bid. There might be a better alternative or better business fit, especially if you’ve been with the same vendor. I always say, ‘You don’t know what you don’t know.’
Secret #4: Practice due diligence when researching a third-party negotiator.
Consider how much experience a consultant has in the financial services arena. Today, many consultants dabble in many different industries; one that focuses solely on financial services will have that much more knowledge, expertise and influence with vendors.
Ask for references and reach out to them. We use case studies to promote our expertise and real, measurable results.
Also, ask how many and what types of contracts they have negotiated in the past year. If they’ve only handled one or two, their database definitely won’t be updated
Secret #5: Vendors are used to working with third-party negotiators.
It’s becoming more and more commonplace for financial institutions to use a consultant for contract negotiations. Probably around 50% of them do—and the vendors are aware of this. When we started this service years ago, the vendors really put up some resistance—but now it’s not that way at all. We have vendors calling us all the time to make us aware of what they’re rolling out, so that when we talk to institutions, we’re up to date with what the vendors are offering.
Secret #6: The name of the game is BUNDLING.
If you use a vendor for multiple services, you tend to get more discounts when you bundle those services. However, make sure these contracts run coterminous, meaning they each have the same expiration date. If you have overlapping contract expiration dates, it makes it much harder to leave the vendor down the road if you need or want to.
Ready to experience firsthand how JMFA can help you secure significant savings on your next contract negotiation? Request a free contract analysis today.
ABOUT JOHN M. FLOYD & ASSOCIATES (JMFA)
JMFA is one of the most trusted names in the industry. Whether it’s recovering lost revenue, uncovering new savings with vendor contract negotiations, creating more value, serving account holders better or delivering a 100% compliant overdraft service—JMFA can help you deliver measurable results with proven solutions. To learn more, please contact your local representative or call us at (800) 809-2307.