The Arrogance of Technology

Posted November 15, 2017 by Stephen D. Heckard in From the Experts.

“Bright shiny thing increases ROA by X%.” I have yet to read that in a press release from a tech vendor, but I won’t be surprised when I do!

Financial technology vendors have all fallen into the same trap, believing their own press releases. “Our tech is better because, blah, blah, blah.” Ok, prove it! Too often vendors forget they are not selling technology, but service. And, all too often, that service fails to satisfy clients.

Service is a large umbrella, a very large umbrella. It obviously includes operational performance, responsiveness to client needs, and support of client goals and objectives, plus much more. In fact, whatever the client wishes to add to the definition is included, by the client not the vendor.

Service, and service quality, is never defined by the vendor. Vendors often forget that fact. They don’t manufacture the yardstick which they are measured against. They look at their own metrics and disregard what their clients are experiencing. When service becomes dysfunctional, when interacting with the vendor is less than ‘user friendly,’ technology will fail regardless of what was stated in a press release.

Banks do not care if their technology vendor ranks as the top employer in the city, county, or state, or if it is included on a top technology providers list. So what? It always gets back to the question, “What are you doing for me?” Aggravation should not be on the top of that list.

Technology plus service equals performance. Recently, there have been performance issues with some vendors, but that is typically not an industry concern. If either technology or service is deficient, then performance suffers.

Layer on top of that the cost for the services provided and that equals value. When the aggravation of being a customer exceeds the value of that service, changes should be made. From my viewpoint, it appears changes are being made by clients. If a vendor can’t change their service quality then clients can and will change their technology provider.

No bank buys technology services based solely on service, but nearly every bank departs because of it. There has been a great leveling over the past several years in core processing capabilities, as well as with surround and ancillary services. User interfaces have become extremely user-friendly. There are differences, but they are much more subtle today. Vendors on the other hand have become less easy (more difficult) to work with. Vendor business practices, corporate policy, and contractual terms have become increasingly distasteful to banks, and in some cases, bordering on antagonistic. Tech vendors seem to have forgotten that clients pay their salaries. What bank wants to pay for antagonism?

Two years ago in the midst of contract negotiations, I had a client ask me why they felt like the enemy during their renewal negotiation. That’s a terrible way to renew a relationship with a vendor. Earlier this year, I had a very prominent national industry veteran, who interfaces with C-level bankers, ask me why nearly every banker that he speaks with is dissatisfied with their technology vendor. It is a rhetorical question, but one that resonates with me because I experience it also.

Some bankers are biting the bullet and simply renewing their vendor contracts, in essence kicking the can down the road. I had another client recently say that their vendor had them “over a barrel” and the vendor knew it. It isn’t easy to convert - far from it. However, that may be the only way to move forward in the best interest of your bank.

I advised my client to discuss with their senior management what the bank should be doing to prepare for a conversion if they do not experience a more reasonable relationship in the future.

Don’t allow your bank to be placed over a barrel. Don’t wait until the last year of your agreement to take action. It is much too late then to do anything other than renew the contract. Strategically prepare for the eventuality of a conversion - all the while working with your vendor to achieve a better relationship. Be very direct with your technology vendors.

Currently, I am advising a client on strategies to follow during their existing term that will not restrict their actions during the renewal period. Every bank should be doing the same kind of strategic planning regarding technology. Don’t even consider kicking the can down the road.

Regardless of what press releases say and the rhetoric in new service initiatives, and regardless of the perceived quality of the new technology, ask yourself, “What is my vendor doing for the bank?” If frustration and aggravation are the first things you think of when pondering your vendor relationships, then change needs to happen.