Hidden Costs of Wrong Vendor Selection

Jim Marous (00:12):

Every week, we hear another story, a major bank's mobile app crushes during peak hours with no vendor supported site, a credit union's core system update goes sideways, leaving customers locked out for days. A regional bank discovers that their 24/7 support really means leave a voicemail, and we'll get back to you on Monday.

Jim Marous (00:33):

Here's the brutal truth that most banking executives fail to learn until it's too late: you're not just buying a solution, you're buying a relationship that can either supercharge your institution or slowly strangle it.

Jim Marous (00:47):

While your procurement team may obsess over features and price tags, the real question at the end of the day will be that did you determine the success of the program in the long term? When everything goes wrong at 2:00 AM or on a Friday, who's actually going to answer the phone and be able to solve the problem?

Jim Marous (01:09):

Today, I'm joined by Jennifer Gibson, Vice President of Sales for Primax, who has a front row seat to both sides of this equation.

Jim Marous (01:16):

Jennifer's here to reveal the hidden warning signs that can separate true partners from mere sales pitches, the questions banks should be asking but rarely do, and why the most expensive mistake you can make is choosing the cheapest vendor.

Jim Marous (01:34):

In an environment of shrinking margins, accelerated regulatory demands, compressed innovation cycles, and unforgiving customer expectations, understanding a solution provider relationship and support model is now part of the strategic risk management process.

Jim Marous (01:54):

Implementation is only the beginning; resilience and long-term value depends so much more on including the cultural fit between your teams and what is done after the sale. So, welcome to the show, Jennifer. Before we begin, could you please introduce yourself to our audience and share a little bit about Primax?

Jennifer Gibson (02:18):

Yeah, thanks, Jim. Happy to be with you today. I'm Jennifer Gibson, Vice President of Sales for Business Solutions at Primax.

Jennifer Gibson (02:27):

A little bit about my background is that I started in national banking and had the opportunity to be a senior leader of a community bank before moving into the payment space. And I would say the payment space is of course, the complex, fast-evolving, ever-changing space to play in.

Jennifer Gibson (02:44):

And so, Primax is an emerging player in the banking processing space. We are a company that recently in its current state came to be in 2020 after purchasing the original Primax business. And we are backed by Velera, a 45-year-old company in the processing space. So, lots of expertise behind us to power our success as we move forward in the banking processing space.

Jim Marous (03:15):

It's interesting, Jennifer, I come from the sales background, but I started off from the banking side, so I've been on both sides of the desk as you have. And it's interesting because as a vendor or as a solution provider, we all talk about the relationship and how important the composition of our two companies are, and we'll be there to the end with you and everything else.

Jim Marous (03:36):

But there are so many options in the marketplace today and everybody talks the same talk, but really, it's not sometimes until after the contract's been signed and maybe a year down the road, they realize, "Geez, did I make the right decision?"

Jim Marous (03:54):

And so, to start us off, and this is a very interesting topic because we don't talk about it very much, the actual vendor selection process. Could you walk us through the anatomy of what the difference between a true partnership and a transactional relationship is with a vendor and what does relationship and support management look like in practice?

Jennifer Gibson (04:18):

Great question. And having been on the other side of the desk and thinking about that relationship support and how critical it is to your overall success, the amount of due diligence and effort to truly understand what that relationship is going to look like is well worth it.

Jennifer Gibson (04:35):

Partnership is a word you're going to hear almost everyone use in our industry today, but it certainly doesn't mean the same thing across the board. And when I think about a partnership, and we believe very much in partnership at Primax, it’s we vested in the client's success.

Jennifer Gibson (04:52):

Do we have a deep understanding of the client's business? Are we willing to say that the client is unique and own the uniqueness that they want us to own, not forcing into a specific situation or model that maybe doesn't work for how they do business.

Jennifer Gibson (05:09):

And I think when you think about a partnership, trust is critically important, and to have trust, you have to have ownership, and that's what you really need to see to make it a true partnership. I think there's a level of consultation, commitment to being there, and just overall the willingness to exchange ideas, to build upon the goals and to say that I'm going to be a part of helping you get to where you want to be.

Jim Marous (05:38):

So, in your experience, how does underestimating the service model of vendor impact the long-term success of implementation?

Jennifer Gibson (05:48):

It's a great question because you get into the implementation process and you make a ton of choices, and not all of them are going to maybe pan out to be the right choices in the long run, and so how do you get set up for success?

Jennifer Gibson (06:02):

Well, if once the project's over, you don't have a good understanding of how you can get support, of how you can make changes, of how you can really evolve the process, you often end up with technology that maybe doesn't work quite the way you've intended.

Jennifer Gibson (06:18):

You think about all the systems that banks use today and how important it is that they work together, and often you'll see a situation where maybe something didn't go right and we're cobbling together three different systems behind the scenes. We’ve got a manual process trying to make the front-end look like it’s all seamless, but a ton of work and effort.

Jennifer Gibson (06:38):

And because that partnership or that support model wasn't there to really help to make that technology work, the bank is left kind of fighting the fight alone and struggling to get what they wanted out of their program in that circumstance.

Jim Marous (06:54):

So, when you look at support models, what are some questions (taking the other hat off and putting the banker hat on) that banks should ask their vendors that they may hate to answer?

Jennifer Gibson (07:11):

I think the ratio. You typically have service and relationship management within any perspective of a solution, and so what is the ratio of that service support resource to the clients or that relationship management resource? What is the ratio?

Jennifer Gibson (07:31):

If you're one of 100, you know what you're getting into; if you're one of 50, you understand. If you're one of 10, you also understand that expectation. But often, banks don't understand that coming into the relationship, which can create some frustration further down the road.

Jennifer Gibson (07:46):

I think it's also critically important to understand what is the escalation path. Payments, it's a complex space. Once in a while, something may not work as intended, how do you get that fixed? Because inevitably, it'll be something that happens on a weekend and you might be struggling to get someone to acknowledge your request.

Jennifer Gibson (08:05):

Well, you need to understand that path well in advance to make sure you can be successful at navigating that space in the time of need.

Jim Marous (08:16):

So, it's interesting, when you look at a relationship, it takes two and both have to really answer to how they're going to build that relationship and make it work. So, I'm going to flip this question around a little bit and say as a vendor or as a solution provider in the marketplace, what question is the one you ask of financial institutions that most often, you realize it really didn't come out that way? That they really didn’t (I’m going to not say lie) answer it truthfully.

Jim Marous (08:49):

What is an answer to a question that you ask your partners from a financial institution side that could possibly derail the relationship to some degree if it's not answered truthfully?

Jennifer Gibson (09:02):

Well, I think it starts with what are your expectations. Because if we come into this with a clear understanding of what your expectations are, I can either be honest and say that's probably not realistic within the realm of the environment, or I can align and say, "Yes, we can deliver on that and here's what you should expect."

Jennifer Gibson (09:24):

I think it's also important as a vendor, we have responsibility when you're making a change and you're choosing these complex solutions, what is your experience? Because we should align our support with the experience level.

Jennifer Gibson (09:38):

If you have just hired somebody new to the payment space, you're going to need extra attention to make sure that things are successful. If you have a seasoned veteran in that space, you may want very little intervention in that conversation, but we should know and understand that because that helps us both get to the right place at the end of the event.

Jim Marous (10:00):

That's interesting because it's a difficult question for a vendor to ask, which is, geez, what went wrong in the previous relationship that didn't go quite the way you wanted to, or what derailed? And because as a salesperson (when I was in that role), you are doing everything not to derail the sale yourself, you want that sale — you sometimes skip over some questions that could really make it so that, yeah, you made the sale, but somebody had to pay for this behind the scenes on my team.

Jim Marous (10:33):

So, it’s one of those things that you mentioned; find out what may have gone wrong in the past, what we can make sure doesn't go wrong in the future, and maybe even mention to them, “By the way, here's four or five things that we really need to agree on that we're giving you that you're going to be able to accept the way we're talking about to make this successful.”

Jim Marous (10:54):

Sometimes the deals change after the deal is signed and can happen on either side. So, now a war story — what's the most expensive vendor relationship mistake you've witnessed without naming names, and what warning signs did the bank miss during their selection process?

Jennifer Gibson (11:15):

I think the most expensive have been clients that perhaps converted, and then said, "I never should have did that. How could I get out of that?" Well, liquidated damages apply, and at the start of the contract, that is a very expensive endeavor.

Jennifer Gibson (11:35):

I've also seen it go the perspective of we didn't get what we wanted out of this relationship, so now our payments program is just kind of sitting there stagnant, not really growing. We've got it, but we're not focusing on it because it's too difficult.

Jennifer Gibson (11:50):

Well, if you think about that, you have all these customers within the bank, and they're definitely using cards in particular and other payments mechanisms out there. But if your program doesn't stack up, they're using somebody else's card.

Jennifer Gibson (12:05):

And I think if you think about yourself as a consumer or as a small business owner, how you pay is how you bank. That's the visual image. It's perhaps one of the most important things we do today. And so, if that's not associated positively with your institution, that loyalty factor's probably pretty low.

Jennifer Gibson (12:25):

So, I think it's very important, red flags — you asked the question — I would say if you're not getting specifics during the process when you ask questions, if you're not getting access to experts when you need more detailed information, those are some red flags. And candidly, if you are not hearing people in the sales process talk with passion about the support factor, there probably isn't passion in the support.

Jim Marous (12:57):

Boy, that's interesting because you really need more than ever the difference between the best vendor solution partner and the worst, is usually what happens after the sale. It's not the price, it's not the technology even, it's does the vendor, does the solution provider live your work along with you? Do they take a vested interest in your deployment?

Jim Marous (13:22):

And you mentioned, geez, the program's not performing as it's supposed to. Well, the vendors should be aware of that and raise that question, even if it's painful and say, "What are we missing here? Because this is not the way a lot of our other clients are succeeding. Where's the gap and how can we help?"

Jim Marous (13:41):

So, when you want to look at how you assess a vendor support team, how do you get to understand whether or not they actually understand your operations as a client, as a bank, more than just their products? What questions do you ask or who do you bring into the evaluation process from the vendor side to make sure they actually understand more than just what they're selling?

Jennifer Gibson (14:10):

Great question. I think it starts with what is that implementation process going to look like, and what is the level of effort before the project begins to make sure that the project is set up right? Are you getting an in-person scoping conversation where details will be discussed and essentially, I'll call it pages and pages of questions will be asked to make sure that everything is accounted for and planned for.

Jennifer Gibson (14:38):

That's going to give you a pretty good idea of the depth and the skill that's going to go into making this a success. If that process is light, you might be heading to more of a one size fits all approach, where it's going to be less about your configuration and how you'd like that to function, versus what's just readily available and perhaps an easier path to get to.

Jim Marous (15:03):

It's interesting, we sometimes lean in towards the easier, faster way, but sometimes plug and play doesn't work, and we need to realize that we need to find a way to make it … it doesn't have to be highly customizable, but the blend, to be able to understand the business enough to say, “Let's have some give and take here because I think some of the things we want to present to you make a lot of sense. It’s different than what you have today, but on the other hand, we do want to keep it simple.”

Jim Marous (15:33):

So, let's put your banker hat on, so it's not something that it really is a Primax issue. But if you are a banker, what red flags during the sales process may indicate that a vendor will become a possible post-support nightmare after you've implemented?

Jennifer Gibson (15:54):

I think, well, today, we're blessed with being able to get information readily at our fingertips so we can find some things. You can look at Glassdoor ratings, it'll tell you a little bit about the culture and the environment that you're going into. If culture isn't part of the sales process, if you're not hearing about the culture, that probably means that culture isn't as big of a focus.

Jennifer Gibson (16:20):

And culture kind of determines how we do business every day or how you're going to do business. And from my experience as a community banker, we're all about being there for people, and supporting and giving value. And so, you really want that same relationship in your vendor partners because it's how they understand and relate to you.

Jennifer Gibson (16:40):

And again, I'd go back to if you can't get specifics around support models, escalation paths, commitments to resources to help you do business, I mean, I would challenge your vendor with the problems that you're trying to solve, I would ask them how they will help you solve them. Because right there's the facts, are they going to bring the tools to the table that help you be successful?

Jennifer Gibson (17:04):

I would stress that the choice today, like price and cash, can look really flashy upfront, but there's also value. And value comes into understanding how you're going to do business together once that contract is signed, what does it look like after implementation? Value is what's going to help you grow and get the returns that you hope for in that program when you made the choice.

Jim Marous (17:29):

When you were a banker, what was the one question that was your go-to, that you really felt really good about the fact that the way they answered that question was really a good indicator as to were they a good fit for my company?

Jennifer Gibson (17:44):

I think the questions, there's probably a couple of go-tos. Tell me what we would be talking about one year down the road if you came back into the sales process. And if the salespeople have no idea what that conversation would be a year down the road, then they're just very vested in the front end, not the entirety of the experience.

Jennifer Gibson (18:08):

And then I think the other thing is give me examples of where support that your institution has provided, has aided a client, and tell me specifically, help me understand when something goes wrong what am I going to do?

Jennifer Gibson (18:30):

I realize I'm not going to call you as a salesperson, you're probably not the right resource, but where am I going to go? How am I going to get that help to make sure that everything functions as it needs? Your vendor is really part of your brand, and so it's important that you understand those factors.

Jim Marous (18:48):

That is a great question because (I'm again putting my sales hat on) if the salesperson doesn't know of any post-sale implementation process that went wrong, that means it's probably either not being shared or they don't want to share it with you. And as a result, does that mean that the salesperson really gets out of the entire loop once the product's sold?

Jim Marous (19:12):

And I think that's a red flag to your point. I think it's interesting because I never thought about that question the way you referenced it, but I think it's a key element that says, number one, if they don't ask upfront what is your North Star? What do you want to achieve with this? Where does this fit within everything else?

Jim Marous (19:30):

And if they don't truly know how to answer the question of give me an example of something went wrong and how you solve for it, and that wasn't part of their repertoire, it means all they're trying to do is sell the product on maybe cost, maybe functionality, but not on the things that maybe went wrong.

Jim Marous (19:47):

And it's interesting because we interview a lot of people on the podcast and the people that have the most passion are sometimes the ones that said, "Oh, I have a nightmare story that I have to share with you, but I'm really proud of how we solve for it." That’s pretty cool.

Jim Marous (20:01):

So, obviously, in the payments world, a lot has changed lately. How do recent innovations change the way service and support models have been delivered now?

Jennifer Gibson (20:12):

I think like everything else in the world, AI can help you find answers faster, can be a tool that can make repetitive tasks more simple to do. So, for example, let's say you have a basic service question, and you can use a tool by inputting that question today, and if the answer is readily available, you can get the answer.

Jennifer Gibson (20:33):

Great time saver versus going through a process of submitting an email or a ticket and waiting for a response. You don't have to stop what you're doing, you can get the answer, move on. Repetitive tasks can be engineered.

Jennifer Gibson (20:47):

We can use bots today to take care of simple things. The process of maybe changing rates, prime rate, and you used to have to submit forms and do all these complicated processes and wait while a bot can make that change very simplistic and timely upon those changes. So, lots of great enhancements in that space.

Jennifer Gibson (21:08):

I think we also use it today within our own team. So, contact center is so very important; those experiences, when somebody does call. Today, when you call, you're typically calling because you need something.

Jennifer Gibson (21:21):

So, using that monitoring that's available to you, measure the sentiment of the call, and to understand when the agent might need more help, also to supply the agents with answers in real time. So, lots of great enhancements.

Jennifer Gibson (21:36):

I will say I think our business is still a people business because you still need the experts, but if we can take some of the processes and make them more efficient and leverage AI to increase the speed of answer, it's a win for everyone.

Jim Marous (21:54):

So, again, putting your financial institution hat on, how should bank structure vendor contracts to ensure that there's accountability and responsiveness support throughout the whole relationship?

Jennifer Gibson (22:07):

And we haven't talked about this yet, but service level agreements are important, and they're going to be accessible, you're going to have access to that, but do you understand? Do you take time to ask the questions to really know, does this service level agreement do anything for me? Does it meet what I'm expecting?

Jennifer Gibson (22:27):

That's really critical because often, there are going to be some standard options available but they may not actually translate to what you were hoping for within that space. I think asking for a clear call out on your ratio of service support to number of clients served, I think is important.

Jennifer Gibson (22:48):

At least understanding and having a realistic expectation as to what that's going to look like. And I hit on this a bit before, but I think having a defined escalation path because it is important when you need help, you want to know how to get that help.

Jim Marous (23:10):

It's funny how we refer to vendors in a negative way as opposed to people with support and solution providers, we give nice names and cliches — but now more than ever we've got to be prepared for the future. When we talk about resilience, we're really talking about are you going to be able to scale when you need to or change and have the flexibility when you need to?

Jim Marous (23:34):

What's the difference between, or how do you determine if an organization's going to be ready for where you want to be in the future? Maybe again, another one of these things, what's the question you ask a vendor to make sure that you get a sense that they're going to be ready for where you want to be two years from now?

Jennifer Gibson (23:54):

Great question. I think asking questions around the direction of the organization, where the focus is going to be, where the dollars for investment are going to be spent, and just in general, like what is the thought leadership position of the organization? You've got a great topic today — stablecoin, it's the genius act, there's a lot going on in that space.

Jennifer Gibson (24:16):

Well, how are they responding to that? What are the thoughts on it? It's not that you're expecting clear direction probably in today's environment, but are the organizations thinking about things like that, and what it potentially means for the customers that they serve.

Jennifer Gibson (24:31):

I would also say the better, my perspective on it is really are they asking you what your thoughts about what your institution needs for the future? Because you're seeking that alignment, and so if they're not wanting to understand directionally where you see the business going, that's a bit of a concern.

Jim Marous (24:54):

That's a good point, especially if you're getting a brand-new relationship or a brand-new category, for instance, at a community bank that says we're going to get into the card or the payments business more strongly than we have.

Jim Marous (25:10):

And you want that organization to be your partner that's already two years ahead of you because you realize you're already behind. It's not like you're getting a lead … if you're not coming in from a leadership position yourself.

Jim Marous (25:21):

And to your point, I think I also like it when we're finding more and more vendors that say we love it when our clients actually are bringing new ideas to the table as well, and that we can implement them.

Jim Marous (25:32):

I think finding out from a vendor, give me an example of where one of your clients brought you an idea you hadn't thought of and you implemented; how long did it take you? Because it shows that they were going to get outside their comfort zone as well. Because we’re certainly asking the financial institution to do so.

Jim Marous (25:49):

Now, rather than just say a bad example, give me a good example of where a strong vendor relationship actually helped avoid a crisis, fix a crisis, or address a major operational challenge.

Jennifer Gibson (26:05):

A great question, because it is about how you show up when you're needed to show up. So, not going to use any names, but an example of a situation where a core update caused a financial institution to go down over a weekend and the complications of the system were going to require a lengthier period before things could be restored.

Jennifer Gibson (26:28):

And so, being able to be there for that institution, immediately changing the stand-in limits to be more effective, to understand that they were in crisis, offering to take phone calls so that understanding that they wouldn't necessarily be able to support their customers with some of those questions. Being able to just offer those services and be there.

Jennifer Gibson (26:50):

Those cards for the most part still worked. Not everyone, but appropriately within that space, just being able to make adjustments quickly and understanding the importance of being there to do those things.

Jim Marous (27:03):

So, we've given a lot of examples and talked about theoreticals and even some specifics. How does the Primax support model work, and how does your team help facilitate success for your clients?

Jennifer Gibson (27:18):

So, we say essentially, you've got a quarterback. Your quarterback is the relationship manager of the team, and they should be the one who essentially knows what you're trying to do and be able to advocate on your behalf, and bring all 10 other members on that side of the field together to help to support that.

Jennifer Gibson (27:37):

So, also, you have a dedicated service resource that helps you on a day-to-day basis with those changes, those updates, things you may be looking for. So, those two work in tandem, but we bring a host of other people behind the scenes.

Jennifer Gibson (27:51):

So, if you need integration experts, if you need loyalty experts, digital banking experts those folks are always accessible, and your quarterback will help to get them on the field for you to make sure that we're really delivering and giving you the experience that's needed. I think our approach is, it's not just about what you choose to use, it's how we enable those things to actually work for you that's going to create success.

Jim Marous (28:20):

That's a very good point that if you don't understand all the product services and things that keep people up at night around your product (not just your product), you're not understanding banking. Because now, more than ever, with everybody picking their selection of solution providers, if you don't understand all those other solution providers and what they provide, there's gaps. You don't want to have to rely on your client to know everything. I do want to rely on my vendor to know everything. It's just one of those things I like.

Jim Marous (28:53):

So, if you could give one piece of advice to a bank executive today before they sign a major vendor contract, what would it be?

Jennifer Gibson (29:04):

I would say do your due diligence, ask the detailed questions, seek to really understand what the relationship is that you're moving into. I'd also say there's doing due diligence with references, making sure that when you show up to a reference call, you've got specific questions that you want to get the answer to.

[Music Playing]

Jennifer Gibson (29:27):

Get underneath the hood; ask them when something broke, how did it go? Do you get consultative advice from your relationship? Is this partner helping you get to your objectives? Do you feel like you're rowing in the same boat, or do you feel like you're rowing in circles?

Jennifer Gibson (29:46):

I think there's just an important amount of due diligence because these contracts are often five years, sometimes longer. So, you're going to be paired with this partner for an extended period of time, it's really important to make a good choice.

Jim Marous (30:03):

Thank you very much, Jennifer. I appreciate your time today.

Jennifer Gibson (30:06):

Thanks, Jim.

Jim Marous (30:09):

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoy what we're doing, we would really enjoy a positive review. Also, check out my recent articles in The Financial Brand, the research we're doing for the Digital Banking Report. Be sure to watch or listen to our other podcasts in the Primax Payment Solution series.

Jim Marous (30:29):

This's been a production of Evergreen Podcasts. A special thank you to our senior producer, Leah Haslage; audio engineer, Chris Fafalios, and video producer, Will Pritts.

Jim Marous (30:41):

If you want to hear more about the Debbie platform and how it can boost engagement by rewarding positive credit behavior, check out our previous discussions with the Debbie founders on the Banking Transformed Podcast.