How to Select a Third-Party Vendor for Financial Services: A Credit Union Guide

Knowing where to start when selecting a third-party vendor for your credit union can be challenging. These add-ons to your core processing platform can significantly affect the member experience of your credit union. There are many options available, and each one seems to offer something different. This guide will walk you through the process a credit union should undergo when making this critical decision. We'll discuss what factors to consider and provide tips on how to find the right vendor for your institution.

Life Goals

Whether you are adding a brand-new solution or looking to switch to a different vendor, determine why you are searching. Namely, what are your goals for the new deployment? For instance, if you are looking to attract a younger demographic, explore the options available in the digital banking sector. As a general rule of thumb, the younger your target demo, the more comfortable they are with new technology.

If you already have a vendor and are looking to change, address what problems you are attempting to fix. It could be as basic as their response time is unsatisfactory or as complex as their platform is too clunky on Android. Basically, these problems can be boiled down into three key metrics: you need better technology, better service, or better pricing.

Better Tech

Chasing better technology can have a very significant upside. The new solution can give the credit union a competitive advantage, leading to increased membership, loans, or deposits. It also might have some interesting ancillary benefits like being able to offer unique features in the market. New solutions are also a new topic that flagship marketing campaigns can be built around. For example, rewards programs are great for attracting a younger demographic, and advertising is fairly simple.

New technology can also be a double-edged sword. New technology lacks the tried-and-true reliability of an established solution. There are likely to be more problems and glitches in the early days. Also, if the credit union does not have the internal resources to support it, it might need to expend additional money on consulting or training.

Better Service

This is the most crucial factor to consider when looking at vendors. After all, what are you really paying for if a vendor does not have outstanding customer service? When considering better service, look for things like response time (you should be able to get someone on the phone or live chat within minutes), customer satisfaction rates, and the company's overall reputation.

Better Pricing

Swapping vendors for better pricing is always a legitimate reason. Although it is important to get a good price, be wary of companies that offer rock-bottom prices. In many cases, you get what you pay for. When meeting with vendors, ask about their pricing plans and be sure to compare apples to apples. Also, ask if they offer discounts for more extended contracts.

Typecasting

There are three primary vendor types in the credit union industry: direct, indirect, and resellers. Direct vendors develop and maintain their own software solutions. They will also provide support and training on how to use their products. For example, ESP is a direct vendor of the FORZA³™ core processing platform. Indirect vendors do not create their own software but customize or configure an existing solution to fit a credit union's needs. They are often "white-labeled," meaning they rebrand the product and generally support it. Resellers are similar to indirect vendors but act as a middleman between you and the vendor. Go ahead and ask your sales rep of the service you are researching which type of vendor they are.

Take a Demo

One of the best ways to get to know a third-party solution is by taking it for a test drive. Most vendors offer a live demonstration of their products via teleconferencing. At this time, it is essential to bring in at least one staff member who will use this new solution regularly. The team member will ask different questions than management and provide insight into whether the new solution will positively impact the workflow of the credit union. In the demo, also inquire how the member experience will be affected. Walk away from platforms that are challenging for members to use and ultimately adopt.

Keep an Open Mind

When meeting with vendors, looking at all the options is essential. The vendor might suggest something that you had never considered before, a feature of their product that might fundamentally change how your credit union operates. Online membership enrollment and loan origination platforms will significantly impact the way your credit union grows its membership and processes loans. A full-featured digital banking application with bill pay, remote deposit capture, and P2P payments will affect the number of personnel required to staff your branches.

The Core of the Matter

Keep your core processor in the loop when looking at third-party vendors. Your data is secure with them and they will most likely have the biggest lift in the implementation. Include your core in discussions as early as possible to make sure they can accomplish your deployment on schedule. Also, your core can manage timelines and act on your behalf when finalizing details. If your core has multiple vendors for the same type of product (e.g., bill pay or card processing), they will have definite opinions about which vendor to choose which they may or may not choose to publicly share. Customer service, responsiveness, and stability of the product are the factors that core processors really care about.

Ask Around

A critical step in your due diligence process is to reach out to the management of your fellow credit unions and get their opinion on a particular solution. Utilize your membership in state or regional credit union associations and gather anecdotal data on how well the solution runs and how responsive is their customer service. They should be happy to chat and give their honest opinion.

Making the Decision

Once you have defined your goals, taken a demo, brought in your core, queried other credit union professionals, and considered all of the factors, it is time to make a decision. Choose the vendor that your due diligence indicates as the best fit for your credit union.

Plan the Launch

Every new solution your credit union deploys is an opportunity to attract new members and keep existing ones. Plan a marketing campaign to promote the new solution months before the launch date and espouse its virtues months after. Let new deployments become a part of your credit union's brand.

In Conclusion

We hope this guide has helped provide you with a framework for selecting the right third-party vendor for your credit union. If you have any questions, please do not hesitate to contact Sales. We would be happy to help you navigate this process and find the best solution for your institution. Thank you for reading!