Bank Tech Vendor Evaluation Questions: 4 Key Questions Banks Miss
Financial institutions often rush into technology partnerships without asking critical questions that could prevent costly mistakes down the road. In my two decades covering banking technology, I’ve witnessed countless institutions struggle with vendor relationships that soured because they failed to look beyond the glossy sales presentations.
The banking technology landscape has become increasingly complex. According to a recent McKinsey report, banks now manage an average of 250-300 third-party vendor relationships, with technology vendors representing the fastest-growing segment. Yet the American Bankers Association found that 62% of financial institutions express dissatisfaction with at least one major tech vendor relationship.
“The vendor evaluation process tends to focus heavily on features and pricing while overlooking fundamental questions about operational compatibility,” says Sarah Kimball, Chief Technology Officer at Meridian Trust Federal Credit Union. “This creates painful surprises after contracts are signed.”
My conversations with banking executives, industry consultants, and technology providers reveal four crucial questions consistently missing from vendor evaluations:
1. What happens when things break?
Banks meticulously evaluate what technology can do when functioning perfectly but rarely dig into vendor response when systems fail. The Federal Reserve’s 2023 Technology Resilience report indicates that 78% of financial institutions experienced at least one significant technology disruption in the past year.
“Everyone assumes systems will work as promised,” explains Marco Fernandez, banking technology consultant at Cornerstone Advisors. “The reality is that every platform experiences issues. The difference between good and bad vendor relationships often comes down to how they respond when problems arise.”
Smart banks request detailed information about incident response protocols, average resolution times for different severity levels, and escalation procedures. They also check references specifically about crisis management experiences.
First Horizon Bank’s Chief Information Officer Tammy LoCascio implemented a “disaster scenario interview” with potential vendors. “We present three realistic failure scenarios and ask them to walk us through exactly how they would respond,” she told me. “It’s remarkable how quickly this separates vendors with robust processes from those making promises they can’t keep.”
2. How well does the solution integrate with our existing ecosystem?
Most banks operate within complex technology ecosystems built over decades. The Federal Financial Institutions Examination Council (FFIEC) reports that the average community bank maintains 15-20 core technology systems, while larger institutions may juggle hundreds.
“Banks frequently underestimate integration complexity,” says Kevin Tweddle, senior executive vice president at the Independent Community Bankers of America. “A solution that works beautifully in isolation but creates data silos or requires manual workarounds provides limited value.”
Integration questions should extend beyond technical specifications to process flows and data governance. Banks should request detailed API documentation, integration success stories with similar institutions, and transparent discussions about limitations.
Research from Celent shows that integration problems account for approximately 40% of project delays and budget overruns in banking technology implementations. Smart institutions create detailed integration requirement documents and involve both IT and business stakeholders in these discussions.
3. What does the true cost structure look like?
The sticker price rarely tells the complete financial story. A Cornerstone Advisors study found that the average bank underestimates the five-year total cost of ownership for major technology implementations by 40-60%.
“There’s a tendency to focus on the base subscription or license cost,” notes Christine Barry, research director at Aite-Novarica Group. “Hidden fees for implementation, customization, additional users, data storage, and premium support often materialize later.”
Forward-thinking institutions request detailed breakdowns of all potential costs, including implementation services, training, maintenance, and potential charges for exceeding usage thresholds. They also investigate the vendor’s pricing history to understand how aggressively costs have increased for existing clients.
The Pennsylvania Bankers Association recently published guidelines recommending that banks calculate technology total cost of ownership across seven categories: direct licensing, implementation, integration, training, ongoing support, infrastructure requirements, and internal resource allocation.
4. What’s your innovation roadmap?
Banking technology evolves rapidly. Selecting a vendor that can’t keep pace with emerging capabilities and customer expectations creates competitive disadvantages.
“Too many banks choose technology based solely on current requirements without considering future needs,” explains Dominic Venturo, chief digital officer at U.S. Bank. “They effectively lock themselves into yesterday’s solutions.”
Strategic banks evaluate vendors’ innovation philosophies, R&D investments, and specific roadmap commitments. They investigate how frequently meaningful updates are released and how the vendor incorporates client feedback into product development.
A 2023 Forrester Research report found that banks working with vendors ranked in the top quartile for innovation agility showed 31% higher digital customer satisfaction scores and 22% better operational efficiency than those using less innovative providers.
The financial services landscape continues evolving at breakneck speed. Asking these four questions won’t guarantee perfect vendor relationships, but they dramatically improve the odds of successful technology partnerships. As someone who’s chronicled hundreds of banking technology implementations, I’ve noticed a clear pattern: institutions that dig deeper during vendor evaluations face fewer surprises and achieve better outcomes.
For banks navigating vendor selections in today’s complex environment, the message is clear: look beyond features and price to understand how these relationships will function through both good times and challenging ones.
