Expensive Pieces of Paper

Did you know the average cost of issuing and awarding a Request for Proposal (RFP) for banking services, using internal resources, is… $45,000?

At that cost, the RFP better be worth it!

Expensive Pieces of Paper

In many instances, that’s not the case. What we tend to find are 2016 banking-services RFPs are often trapped in a 1990s template.

Recently, I reviewed a large national banking RFP that had the same wording of ones I’d seen many years ago. In fact, it was a replica of another such organization’s RFP that had been issued several years before. It lacked color, specifics, and data and was serving as a set up for a price war between banks. The real problem is that very few banks will respond to it. The end result will be a ton of money spent with no significant outcome to warrant the expense.

If you are planning to issue a banking RFP, consider the following:

(1) Conduct a liquidity/ banking analysis first that will assess all your organization’s needs, now and well into the future. The more information you can provide competing banks, the more they have to work with in providing a better response.

(2) Create a new RFP format that is fresh, forward thinking, and flexible, making it clear you will consider new ideas.

(3) Limit responses to fewer words and have more in-person conversations. We’ve found paper is not always the best way to determine the right fit.

(4) Address your cash and lending needs both now and in the future; provide a holistic picture. Given new federal regulations, many banks have not been responding to RFPs due to their lack of interest in holding such deposits.

(5) if you hire a consultant to prepare your RFP, make sure you’re not getting a rehash of some other client’s template. Make them do original brainstorming on your RFP and be accountable for the results.

If you decide to issue a banking-services RFP, do it right or else you will be just sending out expensive sheets of paper that will provide little value to your organization or to the banks you want to compete for your business.

If you don’t know where to start or need a fresh perspective, call us. At three+one, we help entities of all sizes evaluate their needs and determine if a banking RFP is right for them. If you’re interested, we can tailor an RFP document for you that is easy to read, reflects and articulates your needs, and is written to get more responses. Our goal is to make the paper your RFP is printed on an asset and not an unnecessary expense.

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We Hope to See You at our Upcoming Presentation:

GFOA of SC – October 16 – 19 (We’ll be presenting twice!)
North Country NY GFOA – October 20th
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Online Banking – Will My Bank Costs Go Down?

This is the first part of three+one’s Summer Blog Series . As there are five Tuesdays in August, I will be addressing the top five questions the nation’s public and Higher Ed financial officers ask me as I travel across the country. Today’s question:

Given there are less bank branches and more efficient online banking services, how come my banking costs aren’t going down?
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Over the last several months, Pete and I have had the opportunity to speak at a number of finance-related conferences. At each one this question has come up: “Given fewer bank branches and greater advancement in technology, will my banks costs go down?”

The answer is both “yes” and “no.”

Online Banking - Will My Bank Costs Go Down?

First the “no.” Given the higher risk and increased compliance mandates established by the Dodd-Frank Wall Street Reform Act*, banks of all sizes have a batch of new costs to deal with.

While fewer bank branches and a reduced support staff do help, banks have had to add compliance personnel to meet new audit and “Know Your Client” demands. It will take a while for banks to fully adjust to the staggering costs of their new reality.

For the top-tier banks, the added costs of federal oversight are in the billions. Regional banks are seeing new costs in the millions. Even small community banks will be spending hundreds of thousands of dollars to fully comply.

Naturally, these costs are then passed on to their customers with higher checking/ATM fees and lending rates along with lower deposit rates.

Now for the “yes.” Bank fees will likely move downward as technology continues to advance thus making them more efficient. I also see banks benefiting from higher interest rate spreads—but all this could take four to five years.

*Already 22,000 pages thick and more are expected!

Stay tuned for next week when we continue our three+one Summer Series where we answer the question: “Why are banks no longer interested in my deposits?”