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When it’s time to leave your vendor…

Bad mojo if you go-go…

Obvious and mediocre won’t be found here—but “Why didn’t I think of that?” will! Challenging the banking status quo is Dan Fisher’s personal mission. Obvious and mediocre won’t be found here—but “Why didn’t I think of that?” will! Challenging the banking status quo is Dan Fisher’s personal mission.

Before you sign a contract with that new core vendor, better talk to a few of the customers who have recently left. They may change your mind. The character of a vendor is defined by how they treat a customer who decides to leave.

How customer transitions begin

There is a tremendous amount of movement today, when it comes to banks changing their core vendor. We have seen more core selections away from the incumbent vendor in the last three years than we have seen in the previous ten years.

Each bank has a tipping point, but the decline usually starts with lack of attention from the vendor.

Second, there are the constant delays in rolling out products that would improve the market competitiveness of the bank. This is where long-term vendors start losing credibility.

Third, there is the increasing frequency of system failures that the vendor will not admit to. Or they will fail to inform clients of outages. This is where the client begins to lose confidence.

These and more represent a building situation that the client has no control over, other than to walk. Such vendor behavior can and will doom a long-term relationship.

And that’s not all…

Let’s face it, the reasons that banks decide to leave their incumbent vendor are many. Among other reasons:

• A relationship manager who they have not seen in years … or ever.

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• Customer service declining, such as support staff at the vendor help desk who do not know the system they are supporting.

• Annual price increases that are not supported by improved support, services, or product developments, just an annual price increase.

• Nickel and dime pricing, and every excuse under the sun for decreased reliability regarding the internet applications that they are hosting for you.

In short, bankers feel helpless, frustrated, and have grown intolerant of their incumbent vendor given the money they spend each month.

Where character shows

Finally, they decide to look beyond the incumbent, and they are surprised with what they are learning. After a thorough review process, several decide to move. This number is increasing, and they decide to leave, but it is not that easy.

We have observed some terrible vendor treatment after banks decided to pull the plug, as customers transition from the incumbent—and I mean terrible.

This is when bankers find out the character of the vendor:

• A vendor quotes a price, and then the bank finds out it was only an estimate … with a $1 million difference.

• Or the vendor mistakenly forgot to tell you that the company will claw-back all of the discounts they gave you, or the soft-dollar incentives they paid you. (Mind you, you may be converting only four months before the term ends, but they will hit you with this charge for the whole term.)

You quickly find out that your former vendor partner is going to make your life miserable. The vendor will delay giving you the needed test tapes. Overall, transition will hardly be a pleasant experience, even though the vendor will charge a de-conversion fee.

If you thought you were nickeled and dimed when you were a happy customer, you ain’t seen nothin’ yet!

There is no justification to treat a long-term client poorly when they ultimately decide to leave. Vendors need to focus on the reasons why they lost the client and make immediate adjustments to prevent any future losses. They shouldn’t run the client through a negative transition they will remember until they retire.

Check out your next vendor before committing

Institutions that are looking for a new vendor should add an additional layer of due diligence.

For example…

• Check with your professional network and ask members how they were treated when they decided to leave their incumbent vendor.

• Ask the vendor that has submitted a proposal to you for a list of three financial institutions that have recently decided leave and have completed a de-conversion process.

There is a lot more to a vendor than the proposal and you need to find out before you jump.

Again, the character of a vendor is defined by how they treat customers that decide to leave!

These two conversations (your professional network and former vendor clients), could tell you all that you need to know to understand why they are ex-vendors!

Divorces can be ugly, and most are. But leaving a core-processing vendor does not have to be! If a vendor mistreats their lost clients because they are mad at the competition, striking back at them through you, represents a great way to lose more clients and shrink their pipeline of prospects.

Pick your vendors with care, and in the words of Paul Harvey, do your best to know “The Rest of the Story”!

—The Wombat!

Dan Fisher

Dan Fisher is president and CEO of The Copper River Group, a consulting firm headquartered in Fargo, N. D., that focuses on technology and payment systems research and consulting for community financial institutions. For nearly 30 years, Fisher has worked in the financial industry using technology to improve the bottom line. He was CIO of Community First Bankshares (now part of Bank of the West), has served as a director of the Federal Reserve Board of Minneapolis, the chairman of the American Bankers Association Payment Systems Committee, and was a member of the Independent Community Bankers of America Payments Committee. Fisher has written numerous articles on banking technology and the payments system. He has authored or co-authored six books and recently published a book titled, "Capturing Your Customer! The New Technology of Remote Deposit." You can contact Fisher at dan@copperrivergroup.com or at 701-293-6222.
P.S. To understand Dan's nickname, check out "About the Wombat" on his website.       

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