Are Your Vendor Contracts Working for You – or Against You?

By Kelly Flynn, National Director, ADVANTAGE

As someone who has worked closely with credit unions and other community financial institutions on vendor contract negotiations, I’ve seen firsthand how these agreements can either support long-term growth or create unnecessary financial and operational burdens. Core processing contracts, in particular, play a critical role in shaping efficiency, service quality, and overall costs. Yet, too often, community financial institutions – including many credit unions – feel they have little leverage in negotiations, leading them to accept agreements with restrictive terms and rates that could have been negotiated more favorably.

If you haven’t taken a close look at your vendor contracts lately, you could be missing opportunities to optimize costs, improve service, and ensure your technology supports future growth. So, how can you ensure you’re getting the best possible deal?

The Power of Strategic Contract Negotiation

We recently worked with a client that was approaching the renewal of its core processing contract. While they had already decided to change to a new core, they were concerned about the complexity of the negotiation process, potential hidden fees, and making a long-term commitment that might not serve them well in the future.

By taking a more strategic approach with experts by their side, they were able to:

• Secure Substantial Cost Savings – They saved nearly $1 million over the contract term, all while still making important upgrades and expanding services.
• Optimize Vendor Terms – Instead of accepting standard contract language, they successfully negotiated more favorable terms, including better rates and protections against excessive price increases.
• Ensure a Smooth Transition – With expert guidance and support, they navigated the complexities of a core conversion without disrupting service to their account holders.
• Strengthen Vendor Relationships – They secured improved service levels and responsiveness from their vendor, ensuring long-term success.

What’s Hiding in Your Vendor Agreements?

I get it – vendor contracts aren’t the most exciting topic. But they play a major role in your institution’s ability to deliver a seamless experience to your members. Whether it’s core processing, digital banking, or payments, these agreements impact costs, flexibility, and the ability to adapt to future needs.

Some of the common challenges I see credit unions face include:

• Automatic Renewals with Escalating Costs – Many contracts have built-in price increases and renewal clauses that limit flexibility.
• Complex and Opaque Terms – Legal and technical jargon can obscure critical details that impact your bottom line.
• Hidden Fees and Unnecessary Costs – Without careful review, you may be paying for services you don’t need or facing unexpected charges.
• Lack of Leverage in Negotiations – Vendors negotiate these contracts daily, but most financial institutions only engage in this process every five to ten years.

Three Steps to a More Favorable Contract

If you’re approaching a contract renewal or considering a technology upgrade, here’s sage advice on ensuring you get the best possible terms:

1. Start Early – Giving yourself ample time – two, sometimes three years – before a contract expiration allows for a more strategic evaluation of options and stronger negotiating leverage.
2. Work With Experts – Vendor agreements are complex, and having an experienced team that understands industry benchmarks and negotiation tactics can make a significant difference.
3. Build an Internal Team – Engaging key stakeholders, including operations, IT, and finance, ensures all aspects of the agreement align with your institution’s long-term goals.

A Smarter Path to Growth

Navigating vendor contracts and identifying technology gaps may seem overwhelming. Of course, it doesn’t have to be. With the right approach, you can uncover cost-saving opportunities, secure better contract terms, and position your credit union for long-term success. Let’s talk if you’re evaluating your core processor or any other vendor agreement. We’d love to help you find ways to optimize your contracts, reduce costs, and ensure you’re set up for future growth.

Connect with ADVANTAGE to learn how we can help you get the most out of your next vendor negotiation.