Source: PYMNTS
Michael Berman, CEO of Ncontracts, told PYMNTS that financial institutions (FIs) are grappling with the increasing burdens of vendor lifecycle management.
There can be what Berman termed “dire consequences” for FIs as they navigate contract management with their vendors. With the explosion of technology and digital channels, FIs are interacting with consumers and other clients in ways that had never been anticipated.
And as FIs work with vendors to get the services and technologies and compliance in place, to meet customer expectations, “the number of agreements have exploded — and the challenges have exploded.”
Even a small FI, he said, must hammer out as many as 300 agreements with vendors (FinTechs among them), a tally that stretches out into the thousands for larger banks. Federal laws governing compliance are constantly changing too. For FIs, there’s the challenge of knowing whether their agreements are up to date, whether they’re protected, and whether the vendors are notifying their FI partners in timely fashion about cyber-risk related events.
To get a sense of the scope and complexity of vendor management, consider the fact that, as Berman noted, joint guidance from the FDIC, OCC and Federal Reserve lists 17 items about contractual controls that govern third-party vendor relationships.
Complexity reigns, then, and can create friction, Berman said. FIs must invest significant resources in forging relationships with FinTechs before an agreement is even struck, then invest resources in the contractual process, and even invest resources when offloading that vendor in the event a contract is terminated. Armies of attorneys, databases, untold employee hours are spent grappling with legal minutiae.
“You’re either taking a lot of risks,” he told PYMNTS, “because you don’t have the legal resources to spend. Or you’re spending money on legal resources that you could be spending elsewhere if you had the appropriate technology in place.”
Read full article: https://www.pymnts.com/news/cross-border-commerce/cross-border-payments/2024/failed-cross-border-payments-cost-us-merchants-an-estimated-3-8b/
