Over the past year, I have met face-to-face with many bank and credit union executives and banking technology solutions providers, discussing the opportunities and challenges facing banking during this time of tremendous change.
Most bankers cite four things: the need for a modern core platform, greater operational efficiency, a greater focus on innovation, and new skill sets that reflect a more digital future.
Your desired end result is a better customer experience with resilience in the event of an economic downturn.
Most solution providers have tools to meet one or more of these four requirements. In addition, virtually all of these providers have the ability to work with financial institutions of all sizes, leveraging existing platform solutions, at the required speed and scale.
So why are so many financial institutions reluctant to partner with highly capable technology providers at a time when being a “fast follower” is a recipe for failure? And why do vendors have such a hard time communicating the benefits of their solutions?
Bank Leadership Bias Against Change
Research shows that financial institutions of all sizes understand what it takes to digitally transform their institutions. Unfortunately, there is still a bias against change that undermines the ability of legacy banks and credit unions to be better prepared for the competitive and economic environment. This bias is often the result of the institutions’ continued financial success and the risk-averse mindset that is part of the foundation of that historical success.
This combination of financial success and risk aversion makes it difficult for many banks and credit unions to invest heavily in large technology solutions, despite the plethora of case studies presented by solution providers. In many cases, while middle management in financial institutions wants to invest in the tools necessary for long-term success, executive management is reluctant to meet quarterly financial expectations or because managing risk is too much. It’s much harder to avoid altogether.
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Realization Of Daily Bank Deliverables
There’s a consistent message I’ve heard from finance executives at more than 250 organizations over the past year. “The pressure of daily deliverables makes it almost impossible to commit to more than what is being done to keep up the pace of change.” With change happening faster than ever, and many organizations still facing the challenge of hybrid work environments, committing to any major technology upgrade is beyond the reach of many organizations. This challenge becomes even more difficult at a time when finding new talent is more difficult than ever.
For those financial institutions that have invested in major technology upgrades, this has typically been done with solution providers that already have a successful track record with an organization, over time. Trust is created. In other cases, banks or credit unions have undertaken a small banking technology upgrade with limited risk with a proven short-term return on investment.
Willingness To Buy A ‘Solution’ Rather Than A ‘Vision’
At banking conferences, the messages I hear are all over the place…and surprisingly similar. Solution providers talk about “digital transformation,” “innovative solutions,” “smooth core integration,” “customer experiences first,” and “holistic design.” Visit any solution provider’s website and the general messages are the same. The problem is not in the message, but in the perceived scale of effort required for the financial institution to move forward.
If a bank or credit union takes the time and effort to explore solutions provided by technology vendors, there is a huge difference in what each vendor is best at. The problem is that most financial institutions don’t have the time or inclination to conduct the extensive evaluation necessary to confidently select a technology partner.
The problem is made worse by the fact that most salespeople I’ve met echo their employer’s broad view instead of listening carefully to the employee’s needs and challenges. Prospect/Customer Most banks or credit unions today are far more likely to fight internal battles for a significantly larger financial and time commitment than to purchase a “small” solution (one that will provide solid short-term ROI).
In most cases, the maximum financial reward for vendors can be achieved by selling significantly more solutions than by spending a lot of time (and money) trying to sell the big vision rather than solving a specific business need. Get by spending. Increased sales will build confidence and increase opportunities over time…especially when banks and credit unions focus on cost management upfront. A possible economic recession.
An additional benefit of selling a particular solution that can be implemented quickly is that the potential market is able to purchase a much broader solution than the universe of possibilities.
The Need For Speed And Scale
Both financial institutions and technology providers understand the importance of speed and scale in today’s marketplace. Another 18-24 months for decisions It may not seem like it, and organizations need to create. And implement solutions that can have the greatest impact across the organization. In a Banking Transformed interview with China Web Bank. Henry Ma mentioned that the average time from ideation to implementation of a new solution is ten days.
Additionally, WeBank can roll out these additional solutions across its entire 300 million customer base in real-time… at minimal additional cost per customer. Future success will be determined by how quickly and cheaply innovations can reach the market. The best way to achieve the benefits of speed and scale will often be through partnerships with technology solution providers.
How Should Providers Respond?
My experience includes a history of being a banker, a solution provider for the banking industry. And an industry observer from afar. More than ever, I believe that technology solutions providers need to refocus their efforts on building trust first. Rather than hoping to make the “big sale” and building trust later. Here are my suggestions based on my experience. And what I hear from very competent bankers and solution providers.
Build confidence. Solution providers must first focus on building mutual trust between themselves and potential customers. Instead of constantly “selling the vision,” act as a consultant… asking questions to determine. The banking executive’s needs and challenges and barriers to moving forward.
Focus on differentiating the solution. If a financial institution is looking for a solution where the provider is not the best, drop the discussion. A square peg will never fit into a round hole without a lot of pain on both sides. Remember that speed and scalability are goals for everyone involved.
Set expectations. Because time is of the essence in today’s marketplace, setting expectations around roles, responsibilities and outcomes is essential. In many cases, the financial institution will not have the necessary human resources to implement the solution. If so, the technology partner will need to build confidence that they can provide the necessary human component.
Determine the budget. Rather than waiting until the end of the engagement process, both the financial institution. And the banking technology provider must determine whether an investment of time, money, and resources is needed. In some cases, the solution provider can help provide some resources. If alignment is not possible, it is often best to wait until it is.
Understand the decision process. In my experience, many potential partnerships are hindered. Because there is complete agreement on all of the above components…but at the wrong level. As a salesperson for most of my career, I loved positive reinforcement for what I was trying to sell. When there were no sales, it was often because I was never high enough at the banking technology or credit union. I had not built trust, differentiated my solution, set expectations. Or estimated budgets with the person(s) in charge of the procurement process. Sometimes the person you were working with didn’t even realize that they had no say in the final decision.
Expand relationships. If the onboarding process is handled well, expanding the relationship becomes easier. Trust is built even when things don’t go as planned if there is a genuine partnership.
Interestingly, sales are lost under two conditions in the current environment. First, if the sale is too fast before trust is built, needs are identified and expectations are set. Second, if sales are too slow and competition eliminates the partner who may have the best solution.
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