3 Ways Banks Can Improve The RFP Process

Financial services firms are relying more than ever on the request-for-proposal process for soliciting technology from vendors -- but are these processes resulting in investments that pay off for the bank? Not always, says Chuck Schmit, the manager of sales operations at Jack Henry & Associates, a core banking solutions provider. "We've definitely seen increased use of RFPs over the last few years and have grown that area of our staffing considerably," Schmit reports. "We're seeing financial institutions that haven't used RFPs in the past starting to use them."

Schmit says it's easy to discern those banks that are inexperienced in the RFP process. They tend to include many unnecessary questions in their RFPs about the vendor's background instead of focusing their search on their needs, he explains. These banks have trouble getting the most out of their RFP endeavors because of that lack of focus, Schmit adds. "Just because a vendor provided a great volume [of answers] and gave a sharp-looking presentation doesn't mean they have the best solution" for the bank.

In order to get the best product, experts such as Schmit advise banks to put less emphasis on soliciting a large volume of information from the vendor. Instead banks should focus their RFPs on their future goals and how the vendor's technology, service and culture can help in achieving those goals as a partner. Here are some tips that banks can follow to narrow down the focus of their RFPs to what is important and get the most out of the process.

1. Leave The Present In The Past

Banks use RFPs to find solutions to their current problems, but the right solution is the one that fits in with the bank's future objectives. Too often banks use the RFP to simply describe what they're doing presently or what problems they're facing, Schmit says. "[Banks] fall into the trap of saying that they're looking for better than what they're doing. Then they just describe what they're doing today. You need to align the RFP with your future objectives," he recommends.

In describing their future needs, bankers have to explain what they need the new product to do now, but also what they think they'll need it to do in two or three years, says Joseph Wagle, Hewlett-Packard's worldwide director for commercial industries and managed services. Banks need to explain these future needs in the request for proposals, he adds, and tell vendors that the technology has to meet them with manageable risk.

Explaining the institution's future needs comes down to communicating its future business and IT strategy to the vendors. Banks often don't do this, and it results in a solution that addresses a current "solid" state, Wagle explains. "Unfortunately this solid state is a mirage -- the truth is [the bank's] needs continue to change and the vendor's responses will be irrelevant in a year or two," he adds.

2. Dialogue Provides Insights

Having a dialogue between the vendor and client bank is absolutely essential to getting the most out of the RFP process. Banks can learn facts about the product and the vendor from the answers in the RFP. But to get the best solution possible, the bank needs to know what kind of partner the vendor will be going forward, says Russ Bostick, a managing partner at MVP Advisory Group, a financial services consultancy.

[Predicting Success In Banking & Politics: It's All About The Analytics]

Today too much of the RFP process is about collecting answers and feeding them into sophisticated models to find a solution, Bostick says. "That boils the life out of the decision process. You lose sight of the fact that no two vendors are the same. They can have different strategic goals for their organization and different cultures," he says. To understand these less-concrete issues and incorporate them into the decision-making process means the bank and vendor can't just interact through forms and spreadsheets. They have to talk to each other.

HP encourages this dialogue with potential clients by taking them to visit one of the company's current customers, according to Wagle. He admits that such visits can be difficult to schedule, but he describes them as priceless in terms of helping the bank find out what it's like working with HP and its technology.

In turn, HP's team goes to visit the potential bank client to meet with the institution's staff and see how they are interacting with the technology they use today in the branch, IT organization or line of business, Wagle adds. These "day in the life" visits help the vendor understand the situation on the ground for the bank's staff through interviews and observation of everyday operations, he says.

3. Competition Breeds Success

Banks need to look at starkly different vendors' products for the same problem to get a full view of the options different companies have to address it, says Bostick of MVP Advisory Group. When he is advising clients on searching for a vendor, Bostick says he likes to give the client the most varied options he can come up with. "It's important to take a position and realize that the vendors aren't exactly comparable," he says. "They can pick one of those options and then do a second comparison with vendors similar to that choice based on price."

And competition for the bank's business shouldn't stop after the contract between the bank and the vendor is signed, Bostick advises. Especially for large projects, Bostick says it's best to give the majority of the work to one vendor and some of it to a second. But both vendors should be able to do the other one's work on the project. That way, Bostick explains, if one of the companies fails to live up to its contract, "both vendors should be reminded that their roles could be switched. You need to have constant competition."

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio