Pub. 14 2024-2025 Issue 1

Take a Longer View of Your Critical Vendor Contracts

Any bank executive who’s taken part in critical vendor contract reviews, RFPs, negotiations and renewals knows that the process can be cumbersome (at best).

Contracts, by nature, are challenging to get right, and maintaining your fair share of leverage in the relationship is complex. Arcane terms and clauses are added by attorneys and purchasing teams outside the view of those managing the ongoing relationship. People change roles — and companies — over the term of a multi-year contract, too. This leads to a typical scenario where managers responsible for a platform, product or service procured from an outside party often have no connection to the original agreement. Multiply this complexity across dozens of vendor relationships — each of which may have a handful of amendments — and the challenge intensifies.

One foundational building block to a successful vendor contract strategy remains as crucial as ever — and, unfortunately, as elusive. Banks need a clear, long-term view of their vendor contract footprint, including expiration dates and key negotiation windows, and an understanding of critical co- and inter-dependencies across vendors and contract types.

Taking the Long View

A five-year contract can seem like an eternity at the signature date. Not only does that time pass in a flash, but by the final year, it’s too late to take meaningful action. Most FI vendor contracts include an auto-renewal clause, requiring advance notice of a year or more of intent to terminate. Even if a bank plans to continue with the provider, this loss of flexibility compromises any leverage on pricing or other desired adjustments. For those considering a change in providers, one year is often insufficient lead time for an RFP process and implementation — creating an awkward “lame duck” period.

For this reason, developing an eight-to-ten-year outlook of your vendor commitments is critical. Given the number of moving parts and the increasing reliance on third-party point solutions to maintain a best-in-breed tech stack and customer experience, all financial institutions should onboard this level of planning to allocate resources to address constantly evolving market demands while knowing their pricing is bespoke and consistent with industry benchmarks.

Alignment Is Everything

An increasing number of solutions and providers also creates a more complex web of co- and inter-dependencies. Rarely can an operational platform be swapped out without impacting the rest of the stack. There is an apparent domino effect, and while APIs and middleware can smooth this process, unforeseen interactions are still known to crop up. The input of a partner with deep expertise across the entire landscape of market solutions, pricing and benchmarking, negotiations, and technology integration is a critical investment to avoid surprises. A knowledgeable partner can also help identify attractive product options that may have emerged since the last contract cycle, all while keeping a keen eye on achieving maximum cost savings on every contract.

The Bottom Line

Imagine the power of knowing how all your contracts and commitments impact each other an entire decade out — and being able to act faster than ever to keep your operating costs low while still running a contemporary tech stack that meets all expectations. By choosing the right partner and using a proven, packaged solution like SRM’s ContractMAPSM to visualize your contract horizon, you can finally prioritize competing initiatives and deploy resources in the most meaningful way at your bank. The choice is yours.

Ben Mrva is the Chief Revenue Officer at SRM, a trusted advisory firm serving financial institutions across North America and Europe. Ben is a seasoned expert in identifying cost savings and strategic growth opportunities for banks across North America. He oversees a national sales force and maintains relationships with banking influencers far and wide. He is a frequent media contributor on the topics of vendor sourcing and contract optimization for financial institutions.

To learn more about SRM’s expertise in payments, banking technology and vendor sourcing, contact Colorado Representative Phillip Foster at or (303) 588-1484.

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