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Paladin Blog

Be Careful - That Quote May Be a Hand Grenade!

Posted by Aaron Silva on Jun 12, 2018 9:02:15 AM


fullsizeoutput_5904Your bank is constantly looking for ways to improve its fintech as competition from the big banks steadily increases. Routinely you turn to your current core and IT suppliers for ancillary add-ons like mobile deposit, fraud detection, a CRM or a new EFT card services feature. There are a million options your supplier can up-sell that will improve the current core solution. There probably isn’t an institution in the United States that doesn’t have a quote on someone’s desk waiting for approval.

The problem is that many of these proposals aren’t what they seem. Most are grossly overpriced and can add unnecessary costs and risks to the unwitting banker that signs off without first checking market prices and terms. Unfortunately, bankers are left to guess.


What Does a Hand Grenade Looks Like?

A classic example I like to bring up in my educational sessions is a $450M bank considering adding fraud detection, mobile deposit and a teller product. The vendor had quoted them a setup fee for all three applications of about $100,000 and a monthly expense of approximately $10,000. The five-year cost would then be $100,000 + ($120,000 x5) = $700,000 before any variable usage fees (aka ‘click charges’) would kick in later. The $100,000 implementation fee was a bit much for this CFO since it was nearing the 3rd quarter and such a hit on their financials would really impact their earnings. Reasonable. He asked the vendor sales executive if they could sharpen their pencil and come back with something better. Their reply was surprisingly ‘yes’. The sales executive revised the proposal to cut the $100,000 in half provided the Bank extend their entire current agreement by another 36 months (they had only 24 months remaining at that time). The CFO considered their offer and thought that since ‘nothing was broken’, the system worked fine and the relationship was good – it was okay to accept the offer and he signed the amendment.


Unbeknownst to the banker, the institution was already overpaying the vendor by $11,000 per month for their existing services! When we were engaged some months later to compare their invoice to fair market value using our Paladin Blue Book, we broke the bad news. By extending the agreement by 36 months they had unnecessarily agreed to pay $11,000 x 36 months or $396,000. In addition, we informed the Bank that the exact same new services could have been acquired from the same vendor for about $5,000 or ½ the price they agreed to. This adds another $5,000 x 60 months = $300,000 in overpayment. To add insult to injury the $100,000 setup fee that had been graciously reduced to $50,000 could have been actually reduced to less than $10,000 for the asking. A $40,000 smack to the face – thwap!

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Disarm The Grenade

You’ve got a quote in your hand and you don’t know if it’s a grenade or not. Vendors know that banks don’t know what other banks are being charged for the same products and services, and these prices and terms vary widely. There’s a lot to lose if you guess, pull the pin, and it blows up your bottom line.

Evaluate My Quote Now - $0In assessing more than 1,250 financial institutions across the country for the past decade, it’s become clear that vendors count on (perhaps prey on) the existing dearth of information banks must contend with. We see firsthand the ambiguous disparity from one quote to another, and it’s startling to say the least. The fact is, there’s absolutely no reason to guess.

A decade ago we began assembling a massive amount of quote and contract data into a searchable database.  Similar to a blue book consumers use to determine a fair price on a trade-in vehicle, the Paladin Blue Book informs bankers on whether pricing they’re being offered is in line with national averages. With this valuable resource, we've created a very simple, efficient way for bankers to detect whether they're holding a grenade: Introducing the Paladin Quote Check (PQC). 

Now, financial institutions can easily and confidentially upload via our website any vendor quote for products and services that complement account / item processing, internet banking, bill pay, ATM / EFT, etc. and within 48 hours ($0 cost / no obligation) learn whether PQC detects a grenade.  No guessing and no unwanted surprises. 

In addition, for $499, a full benchmarking report along with recommended contract language to use when negotiating with a vendor is available.  As added protection, we can also make sure the business and legal terms in the final agreement don’t conflict with any existing contract, terms or pricing. 

If you’re curious about whether that quote in your hand is a live grenade, find out before you pull the pin and sign the agreement.