3 minutes
Believing any one of these can prevent you from making the best choice.
This post is excerpted from Cornerstone Advisors' free white paper, "Breaking the Conditioned-Response Habit in Your Vendor Relationships."
When the card processing vendor landscape shifts as drastically as it’s shifting right now, the potential for misconception is huge. And where there are misconceptions, there are bound to be myths.
Cornerstone Advisors negotiates hundreds of system selection contracts for banks and credit unions every year, and we hear the same three themes about debit and credit card processor system selections over and over. I’m here to tell you, these themes are entirely mythical, and I would like to take this opportunity to bust through the myths.
Myth #1: “There is no strategic advantage in one card processor over another.”
This just isn’t true. What is true is that the advantage is going to be unique and specific to each financial institution based on its business needs. For example, if a financial institution’s core processor is also a card processor, the institution should evaluate the card processing solution to learn what is available. If data analytics is a top priority, the institution should align itself with a vendor that has a very strong data strategy.
Myth #2: “Moving card processors is a major effort.”
With all the work that banks and credit unions did for the introduction of EMV, including cleaning up card databases and getting PINs off the magstripe, a debit card conversion can now be done with very little interruption to cardholders. A credit card conversion is a bit more complex, but with appropriate processor support and planning, it’s entirely doable. Fraud is the biggest disruptor in a conversion, but what used to take 180 days now takes just 30 to 45. An unfounded fear of the effort involved should never be a reason to avoid exploring a change.
Myth #3: “A lower price is reason enough to choose a new processor.”
This may be the most important myth to bust. Banks and credit unions often want to change processors to save money. Cornerstone does not recommend this because price is the easiest thing to negotiate with a card processor, provided the institution has both leverage and the data intelligence to get to a market price.
If an institution is getting the desired service and functionality with its current vendor but wants to pay less, it should negotiate price with the vendor. If an institution’s vendor is not meeting its needs on product delivery, changing to a new processor for a better product with increased functionality will probably mean a higher price.
The bottom line on cost: Financial institutions should always look to the market to learn the right price for desired service and functionality.
We've seen an increase over the past year in the number of banks and credit unions doing full card processor selections. It's always rewarding to see how excited clients get when they learn about new features and functionality. Unfortunately, I have also seen how believing any one of these myths can keep an institution from getting the greatest benefits of a carefully researched selection decision.
Don't fall victim to the system selection myths. Do your homework. You can thank me later.
Brandi Gregory is a director with CUES Supplier member and strategic provider of technology and risk management services Cornerstone Advisors, Scottsdale, Ariz., specializing in contract negotiations and payments.
