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Are Vendors Your Biggest Obstacle to Fintech Adoption? It Might Not Be Their Fault

2 min read
Jan 23, 2020

Ask any mid-size financial institution about their biggest barrier to achieving digital transformation, and you might be surprised by the answer.

It’s not budget, culture, or the staff’s digital savvy. It’s their vendors.

An FI draws up a strategic plan to adopt a new technology initiative. When it finally presents its big idea to its existing vendor, the vendor tells them that it’s just not workable.

The banker’s first instinct will be to blame the vendor, but that’s not entirely fair. Your FI selected the vendor. Your FI reviewed and signed the contract. The vendor is delivering your FI exactly what it promised.

What we have here is not a vendor failure. It’s a failure of vendor due diligence and management.

Thinking Ahead During the Vendor Selection Process

When selecting a vendor, FIs need to be looking ahead. A vendor’s ability to keep pace with technological innovation should be included among the selection criteria when evaluating potential vendors.

Too often FIs focus on today’s needs without putting in the time to consider what it hopes to accomplish three to five years from now. Will the vendor it’s hitching its wagon to be able to support those long-term goals?

A vendor that doesn’t check all the boxes today might be positioning itself to be ahead of the curve in just a few years. Might compromising today set the stage for strategic success down the road?

Other times, an FI changes its strategic direction and then is surprised to find out that its vendor can’t support its new goals. It’s like going on a diet and then expecting your pants to fit. Your pants haven’t changed. You have. It’s not reasonable to blame your pants for not shrinking along with you.

Don’t begin discussion with new, significant vendors until your FI has had serious conversations about its strategic direction. You can’t comprehensively evaluate a new partner if you don’t know what you’ll need from it.

Vendor Due Diligence

Once your FI has laid out its strategic goals, it needs to know if a vendor will have the products and services it needs to accomplish them. In addition to basic vendor due diligence dealing with leadership, financials, legal issues, business continuity management, data security and other key areas, you should also find out:

  • What enhancements are planned?
  • What role does customer input play in those enhancements?
  • Is the vendor investing in research and development?
  • Are R&D dollars being spent on core or ancillary products?
  • Will the solution integrate or tie-in with other third-party products you use?
  • Will its product continue to align with your institution’s planned initiatives such as new products and services, M&A, or growth?

Get It in Writing

Salespeople will promise you the moon and stars—but it’s only binding if it’s in writing.

Are they promising you new functionality next year? Are they promising they will help and support you as you integrate their product into your existing systems? How will the price change when you add features to support new initiatives? Get it all in writing.

Your vendor contract should cover any forward-looking promises while protecting the FI from hidden costs, mitigating risk, and ensuring that vendors are working to their full potential for you. Negotiating a bulletproof vendor contract is essential.


Don’t let a poorly selected vendor or a weak vendor agreement stand in the way of your FI’s strategic goals. Make sure your vendor management program supports your strategic goals with foresight, thorough vendor due diligence, and strong vendor agreements.

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