Over the past year, I have met face-to-face with many bank and credit union executives and technology solutions providers, discussing the opportunities and challenges during this time of great change in banking.
Most of the bankers mention four things: a need for a modernized core platform, improved back-office efficiency, a greater focus on innovation, and new skillsets that reflect a more digital future.
Their desired end result is a better customer experience with resiliency in case of an economic downturn.
Most of the solution providers have the tools to meet one or more of those four needs. In addition, virtually all of these providers have the ability to work with financial institutions of all sizes, leveraging the platform solutions already in place, at the speed and scale that is desired.
So, why are so many financial institutions hesitant to partner with very capable technology providers at a time when being a ‘fast follower’ is a recipe for failure? And, why do vendors have such a difficult time communicating the benefits of their solutions?
Banking Leadership Bias Against Change
Research indicates that financial institutions of all sizes understand what is needed to digitally transform their institutions. Unfortunately, there is still a bias against change that undermines the ability to be better prepared for the competitive and economic environment that legacy banks and credit unions are facing. This bias is often the result of the continued financial success achieved by most institutions, and the mentality of risk avoidance that is part of the foundation of that historical success.
The result of this combination of financial success and risk avoidance makes it difficult for many banks and credit unions to invest heavily in major technology solutions – despite multitudes of case studies offered by solution providers. In many cases, while middle management of financial institutions want to invest in the tools required for success in the long term, executive management hesitates in order to meet quarterly financial expectations or because managing risk is so much more challenging than avoiding risk altogether.
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Reality of Daily Banking Deliverables
There is a single constant message I have heard from financial executives at more than 250 organizations over the past year. “The pressures of daily deliverables makes it almost impossible to commit to more than is being done to keep pace with change.” With change happening faster than ever, and many organizations still working through the challenge of hybrid work environments, committing to any major technology improvement is outside the scope of what can be taken on for many organizations. This challenge is made more difficult at a time when finding new talent is tougher than ever.
For those financial institutions that have invested in major technology upgrades, this has usually been done with solution providers that already have a successful track record with an organization – building trust over time. In other cases, banks or credit unions have embarked on a smaller technology upgrade that has limited risk with a proven return on investment in the short term.
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Desire to Buy ‘Solutions’ as Opposed to ‘Visions’
At banking conferences, the messages I hear are spot on … and unsurprisingly similar. Solution providers enthusiastically speak about ‘digital transformation’, ‘innovative solutions’, ‘seamless core integration’, ‘customer-first experiences’ and ‘holistic design’. Visit any solution provider website and the overarching messages are the same. The problem is not with the message, but perceived scale of effort needed for a financial institution to move forward.
If a bank or credit union takes the time and effort to dig deeper into the solutions provided by technology vendors, there is a great deal of differentiation in what each vendor is best at. The problem is that most financial institutions don’t have the time or inclination to do the extensive evaluation needed to select a technology partner confidently.
The problem is made worse since the majority of salespeople I have met echo the broad vision of their employer, as opposed to listening carefully to the needs and challenges of the prospect/customer. Most banks or credit unions would be much more likely to buy a ‘bite-sized’ solution today (that would bring a strong ROI in the near term) than fight internal battles for a significantly higher financial and time commitment.
In most cases, the optimal financial reward for vendors can be achieved by selling a significantly higher number of solutions that solve a specific business need than to spend multitudes more time (and money) trying to sell the grand vision. Incremental sales will lead to trust and expanded opportunities over time … especially when banks and credit unions are focused on managing costs anticipating a potential economic downturn.
An added benefit of selling specific solutions that can be implemented quickly is that the potential prospect marketplace is far more expansive than the prospect universe able to buy a much broader solution.
The Need for Speed and Scale
Both financial institutions and technology providers understand the importance of speed and scale in today’s marketplace. Decisions can no longer take 18 to 24 months, and organizations need to build and deploy solutions that can have the greatest impact across the entire organization. In a Banking Transformed interview with WeBank from China, Henry Ma mentioned that the average length of time from ideation to implementation of a new solution is ten days.
In addition, WeBank can deploy these incremental solutions across their entire customer base of 300 million in real-time … at minimal incremental cost per customer. Success in the future will be determined by how quickly and cost efficiently innovations can get to market. The best way to achieve the benefits of speed and scale will often be by partnering with technology solution providers.
How Should Vendors Respond?
My background includes a history of being a banker, being a solution provider to the banking industry, and being an observer of the industry from an arm’s length. More than ever, I think technology solution providers need to refocus their efforts towards building trust first as opposed to hoping to ‘making the Big Sale’ and then build trust. Here are my suggestions based on my experience and what I hear from bankers and from very capable solution providers.
Build trust. Solution providers should focus on building mutual trust between themselves and prospects first. Instead of continuously ‘selling the vision’, act as an advisor … asking questions to determine the needs and challenges of the banking executive and the obstacles that may stand in the way of moving forward.
Focus on solution differentiation. If a financial institution is looking for a solution that the vendor is not best at, abandon 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 the goal for everyone involved.
Set expectations. With time being the most important component in today’s marketplace, it is imperative to set expectations around roles, responsibilities, and deliverables. In many cases, the financial institution will not have the human resources needed to implement the solution. If this is the case, the technology partner will need to build the trust that they can provide the human components needed.
Ascertain budget. Rather than waiting till the end of the engagement process, both the financial institution and the technology provider need to determine if the investment in time, money, and resources needed are aligned. In some cases, the solution provider can assist in providing some of the resources. If alignment is not possible, it is often better to wait until it is.
Understand the decision process. From my experience, many potential partnerships hit a roadblock because there is complete agreement on all of the above components … but at the wrong level. As a salesperson for much of my career, I loved positive reinforcement of what I was trying to sell. When no sale occurred, it was often because I never went high enough in the bank or credit union. I hadn’t built trust, differentiated my solution, set expectations or ascertained the budget with the person/people who owned the buying process. Sometimes, the person I was working with didn’t even know they lacked control of the final decision.
Expand the relationship. If the onboarding process is handled well, expansion of the relationship becomes easier. Trust is built even when things don’t go as planned if there is a true partnership.
Interestingly, in today’s environment sales are lost under two conditions. First, if the sale happens too quickly – before trust is built, the needs are identified, and the expectations are set. Secondly, if the sale happens too slowly – and competition unseats the partner that may have the best solution.