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October 14, 2016 by Gonzo Gonzo

8 Gonzo Takeaways from BAI Beacon 2016


By: Sam Kilmer & Ron Shevlin

A new BAI conference this year and WOW was it different. Dare we say disrupted? Or rightsized?

Anybody remember the BAI days of thousands of teeming suits at putting green booths filled with ATM’s fighting over passes to budget-busting booze cruises and concerts? After years of the declines in that kind of BAI event, they ceased the Retail Delivery and Payments Connect conferences entirely in exchange for one new converged “immersive experience” at Chicago’s McCormick Place.

Our takeaways…

registration roundabout

1. One Big Loud Room

Imagine one big room with 4 open stage sessions, a couple open group breakouts, a few dozen vendor pods, a registration roundabout, and bankers circling tables full of danishes…all at once. Does that sound loud?  A little more energetic? Well yeah. Think prom night in the high school gymnasium with several dueling cover bands. Different.

Actually, right off the bat, kudos to BAI for mixing it up this year. Let’s face it, the prior format grew tired.  BAI had to change more radically.  We really liked the shorter quick-take sessions and vendors integrated into the scene.   Some of the vendors seemed to like that as well.   While many reported light traffic (especially day 2), it had to be difficult for vendors to differentiate when every pod was essentially the same. Our best vendor chats happened while mixing in the hall well away from their pods. This seemed to work better for the hungrier upstarts than the larger established vendors accustomed to booths-gone-condo, golf-swing-analyzers, and race-car-simulators.

We also liked that there were no drink tickets. Please don’t judge.

2. Speaker Josh Linkner… hey hey, my my

Innovation speaker Josh Linkner claimed it’s not about best practices, but next practices. We disagree. To quote the upbeat economist Keynes, in the long run, we are all dead. We agree innovation is important (hard to argue with that), but best practices create survival and the resource redirects which often fund those next practices. Now, we really liked the role storming technique, a creative way to generate a good new idea by taking on a fictitious role. Linkner took the audience through an exercise where Sam came up with a (hopefully) good banking industry idea while role playing Neil Young for 5 minutes. That was immersive and refreshing. Seriously. Keep on rockin’ in the free world!

taylor swift bracelets

A couple bankers didn’t embrace BAI’s trendy light-up Taylor Swift connection bracelets.

3. Real surprises on real panels talking real business results

American Banker reporter Robert Barba moderated a fintech forward panel with memorable panelist Zions Bank CIO Joe Reilly where Barba’s questioning had Reilly sharing solid details about business change deriving from core system switch. Consolidating 13 loan processing centers into 2 and better integrated treasury is real change. Barba also was clearly asking unexpected questions that challenged his panelists to the point of at least one decline-to-answer. Good stuff. The unexpected! Our team at Gonzo mothership Cornerstone Advisors sees a lot of conferences and — other than audience questions that are loaded sales pitches — nothing worse to witness than scripted milquetoast panels. Well done!

fintech forward barba panel

American Banker’s Robert Barba with Zions Bank CIO Joe Reilly

4. More specific channel and data, less omni-blah-blah

The real action and scuttlebutt we heard in the hall here was mobile first and data. Digital only vendors Q2 & Alkami again with more new employees and talking up more new deals. And feisty startup marketing system provider Onovative now up to 40 clients in just a few years.

5. Fintech stage

Of all the garage band stages, the Fintech stage was the one getting most of the record deals due to producer Matteo Rizzi. Some really cool forward leaning conversations here and light on the noise.  JP Nicols talking up acquisitions of companies for talent and Santander InnoVenture’s Pascal Bouvier assuring that fintech was hot and not just hot air (right on that it’s sometimes hard to tell). Fintech is currently having a bigger impact on customer expectations and future outlooks than on current industry earnings, but the promise is all there.

fintech stage 2

6. Compliance vs. Marketing Smack down.

Steve Ramirez’s session “What Marketers Need to Know About UDAAP” convinced us that the marketing/compliance conversation isn’t much of a conversation. Marketers largely don’t know how to negotiate with, and/or push back on compliance. And, complaint database analysis seems like a good place to start to understand where to focus marketing compliance efforts.

7. Potential for API’s

Well-attended session on “The Potential for APIs in Financial Services” confirmed banking-as-a-platform as a legit topic. (Granted, we may be a bit biased here as we lead a session on the related topic of Platformification).  The key idea in the API session was “the account as a marketplace” where the fundamental components (or functions) of a banking service could be delivered by multiple providers. Hard to find budding U.S. examples, but some Euro startups are moving in that direction.

8. Gritty branch data

We heard good things about the FMSI session that pointed to, among other things, best and worst practice branch lobby wait times. What do people do when they are waiting 11 minutes in a branch lobby? Look at their phones? Doesn’t mobile deposit capture take like 30 seconds?  Seriously, we have to hand it to the FMSI folks for bringing some good data nuggets to the stage (we saw the materials on the mobile app later). Good stuff, even on the topic of cross-sales, not exactly the smash hit topic it was before the Wells account fraud fiasco.

cross selling FMSI

And now we’ll discuss our branch cross-selling in a post-Wells era. Wait, where the heck did everybody go? 🙂

We heard attendance was 1200ish but that might have included a parallel training event.  From a rough scan of the mobile app and the hall, we were thinking 400-500 bank and credit union managers were in Chicago for the newly designed festivities.  Great to catch up with some of you GonzoBankers out there on the road.

INSIGHT VAULT: The SO WHAT of industry trends and eventsInsight-Vault-bank-and-CU-cover

Cornerstone Advisors’ Insight Vault draws on our proprietary research, benchmark data, and real experiences from consulting engagements nationwide.

Provocative ideas.  Straight to the point.  No fuzzy stuff.  And an opportunity to engage our experts to discuss how the trends apply to you.

Check it out here




Filed under: Information Technology, Strategy, Vendor Buzz

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October 5, 2016 by Ryan Rackley Ryan Rackley

Beware the Unsolicited Vendor Offer

Financial institutions and their vendors have been playing tug of war with their terms, conditions and pricing since, well, forever. Both sides in the game are strategically trying to get the best deal for themselves. And why not?

But when a vendor makes an unsolicited offer to a financial institution, it can make an FI’s “Spidey sense” kick in. What’s behind this unease? The offer typically includes a reduction in run rate or some sort of signing bonus. It often means found dollars that can be delivered to the bottom line. Sounds great, right? So what about it feels wrong?

Let’s face it—pricing for the technology products that financial institutions use these days is cloudy, opaque, and has a wider range than in any other industry we know. In our client engagements, Cornerstone Advisors has seen countless incidences of one FI paying double, triple, even quadruple what another FI pays for the same service.

A savvy bank officer may receive an unsolicited bid offering a 5% discount, negotiate it to 10% and feel good about it. But what the savvy bank officer didn’t know is that the vendor still had an additional 30% discount in its pocket to give … but only if the vendor felt it had to give it.

When a bank signs an unsolicited offer, the vendor has the advantage, and that advantage could translate to the bank paying well above market for a very long time. It’s all about paradigms and leverage.

Paradigms – A vendor often makes an unsolicited offer to an FI long before the contract’s renewal date—and well before the FI is thinking of opening up renewal negotiations or starting a market selection search. This is no accident. Remember the “best deal” strategy? The vendor is betting that the contract’s high early termination fees have prevented the FI from exploring alternatives to exiting the contract before the renewal date.

A financial institution can often be talked into moving forward with an unsolicited bid because what the vendor is offering seems, at face value, better than what the FI currently has. However, the question an FI should be asking itself is not, “How much better is this offer than what was attained the last time we did this?” but rather, “How far from market is this offer?”

Obtaining an external market perspective allows the FI to measure on a completely different scale, one that can translate into very positive results.

Leverage – A key concept in contract negotiations is leverage, which boils down to an FI’s ability to successfully negotiate its needs into a contract, including improved pricing, better terms and more flexibility. In a two-party contract there are always opposing agendas. The vendor wants to keep pricing above market, have terms that are favorable to the vendor, and keep obligations to deliver as low as possible. FIs, on the other hand, go to the table with goals that include obtaining pricing lower than peers, terms favoring the FI, solid commitments of delivery from the vendor, and flexibility in vendor choice.

Leverage exists in every negotiation. Either the vendor has leverage or the FI has it. Unsolicited bids are an effort by the vendor to gain leverage and are typically proposed at a time when FI negotiation leverage is low but increases as the expiration date nears.

The amount of leverage an FI has is based on two key factors:

  • Term expiration – When the term is approximately 18 to 24 months out, the vendor and FI know that alternative options can be exercised. Too much or too little term prior to opening negotiations and the vendor has more leverage because the threat of a viable alternative is diminished greatly.
  • Termination fees – Early termination penalties are often very stiff and typically stop an FI from looking at market pricing early in the term, decreasing its negotiation leverage position. The higher the termination fee, the harder it is to exercise alternative options. There can be a point where the termination fee is so high that all parties involved know the threat of converting to another provider is a bluff. Late in the contract, the termination fees drop and the leverage shifts.

What to Do

The FI that does receive an unsolicited bid and whose Spidey sense alarm bells are going off can take steps to ensure the FI does not sign up for a long-term contract paying above market prices.

Here are two ways to help silence those alarm bells:

  • Gain market knowledge – Market knowledge will help an FI understand the position it is in before it makes a seven- or eight-digit spending commitment. There is usually a semblance of savings included in the bid offer. A typical unsolicited bid may not offer discounts on existing services but wipe out a large one-time cost of a project that the FI didn’t budget for. This situation may be appropriate if pricing is already at market, but it may also be vendor justification to maintain higher-than-market pricing.
  • Change the perspective – As a negotiator, the perspective or baseline that is used to assess a proposal is critical. With an unsolicited bid the FI’s first perspective is what the FI is paying today. However, this is the worst possible baseline to have because the market may have commoditized since the last time prices were negotiated. Annual price adjustments may have inflated the pricing above market. The FI’s contract may not have been negotiated down to market originally or at subsequent renewals.Appropriate perspective in any negotiation is that of current market pricing. Knowing that the vendor is at its floor and also knowing the pricing position of the vendor’s top two competitors is the best perspective an FI can hope for. Imagine shopping for a new car and knowing exactly what the dealer paid for every vehicle on the lot. Now that’s perspective!

Gonzo Gutcheck: An FI with best-in-the-land pricing is not going to receive an unsolicited offer from its vendor with improved pricing or a long-term lock. That’s the irony of an unsolicited bid: it signals to us that there are savings to pursue and that the vendor has already opened up the negotiation for us.

Banking executives armed with market knowledge and perspective will see unsolicited bids for what they are and take advantage of the opportunity to negotiate a winning contract.


How do you spell leverage?

You’ll want vendor pricing data from the Cornerstone Contract VaultTM on your side when you negotiate your next contract.

Backed by the combined experience of negotiating more than 2000 contracts with over 50 different vendors, the experts at Cornerstone Advisors  can help you get the most competitive contract with the very best pricing and terms.

Contact us today to learn more.



Filed under: Cards & Payments, Core Processing, Information Technology, Vendor Buzz

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September 27, 2016 by Steve Williams Steve Williams

Life After Stupid Sales Culture

GONZO READER NOTE: We recently received a leaked memo from the new Retail Executive at Van de Lay Bank & Trust and think it’s timely given our industry’s reaction to a world where Wells Fargo meets Elizabeth Warren.


Van de Lay Bank &Trust

September 30, 2016

TO: Retail Banking Team Members

FROM: Harry Foresight, EVP Retail Banking

RE: Van de Lay’s Retail Strategy

Allow me to introduce myself. My name is Harry “Hank” Foresight, and I started my new role last week as the Executive Vice President of Retail Banking for Van de Lay Bank & Trust. I know you all join me in wishing your former boss, Dirk Dreamforce, all the best in his future career endeavors. I know Dirk has great interests in innovation labs, life coaching and competitive yoga, so I know he will remain a busy man.

Let me start by being completely transparent with my team. I joined this bank at a time when retail banking is facing a huge identity crisis. The scandal at Wells Fargo this past month has certainly put a cloud over our business, but I believe Wells is just another symptom of our industry trying to operate an obsolete business model. For the past two decades, Dirk and his outside sales trainer, Zippy Roth, have pushed the “Never Accept No” mantra in our supposedly client-centric sales culture. When I arrived, I observed elements of this culture including the daily sales huddle, the customer profile form, the Top 10 call sheets, the teller sales scripts and the SalesNow! branch scorecard that one employee confidentially referred to as the “performance matrix from hell.”

Despite all this hoopla and pressure, the cold facts show that the bank’s branch-new-account and loan-production-per-branch and per-employee have declined consistently in the past decade. While this team has sweated nervously on a sales treadmill, the world has changed, the consumer has changed, and every aspect of delivery and marketing has changed.

Here’s my overall conclusion: the sales culture at Van de Lay Bank is mostly stupid. We will be blowing it up and starting a new retail strategy that makes sense for the new world we live in. Frankly, I’m very sorry the great team I’ve met across this bank in my first week has been forced to waste so much time on a misguided idea.  Instead of sales on steroids, customers simply want their bank to be straight with them and get things done for them without the typical pomp and B.S. that seem to have invaded the financial services industry. As one CEO in the industry recently said to me, they want “smart people with good hearts who know how to execute.”

If we aren’t going to have a sales culture in the future, what will we have?  I’m not a fan of buzzwords but I would say we’re going to build a “Smart Culture.”  I recently read a cool book from Ron Shevlin at Cornerstone Advisors called Smarter Bank. It proposes that banks will compete more in the future on helping customers with their own financial performance than on the traditional aspects of price and geographic convenience. I am confident that if we focus like crazy on building knowledge and making it easy to respond to customers, we can create win-win opportunities for the bank and its customers. We don’t have to gain earnings per share on our customers’ backs.

Starting tomorrow, October 1, I will begin leading a new Retail strategy at Van de Lay. There are six components of this new strategy.

1: Money and People Will Be Redirected to the Future of Our Business

My initial review of Van de Lay’s financial and operating information shows that 73% of all delivery channel costs are concentrated in our 50 branches. Meanwhile, I see an urgent need to improve our marketing capability with digital, analytics and the need to address a positively archaic call center.

Within the next two years, I plan to close roughly 20 percent or 10 of our branches and redirect this money to urgent delivery channel investments for the future. Once transition costs are absorbed, the $9 million of run-rate operating expense is going to be focused on major upgrades to digital banking, a major Web site overhaul, a digital marketing system, a new call center system, and staff adds in digital, analytics and outbound contact center advisors. We will lower our cost per transaction in the branches by 30 percent while we create the best digital storefront and contact center of any bank in our marketplace.

2: Processes Stink and We Will Improve Them NOW

We all live in a world of Amazon Prime, Apple devices and Uber car rides. How ironic then to see the awful way we handle key customer “moments of truth” such as opening a checking account, originating a consumer or mortgage loan, renewing a CD online or doing basic stuff like an address or ownership change.

There is a defeatist feeling that “compliance makes us do this” throughout the bank. This stops today. I am setting a goal that we will fix a “Moment of Truth” process each 90 days and within three years we will have a dozen key areas of our customer experience overhauled top to bottom. I have asked one of our top branch managers to lead this effort in a SWAT team with a project manager, a business analyst and a compliance analyst. These folks will sit together on the seventh floor, day in and day out, working on experience improvement.

3: Our Gritty Knowledge Will Be Our Advantage

There is nothing more annoying to customers in retail banking that half-knowledgeable people pushing sales. I ordered the “Next Best Product” alerts at the teller line shut down by I.T. this morning. I hate that crap. Today I will start allocating all sales training dollars from Zippy Roth and all the gift card and Igloo cooler giveaway money to build a formal credit and product training/certification program at Van de Lay that will be the hardest thing you’ve ever been through.

We will have the smartest bankers on the street in our market. Every banker will know loans and payment products like an expert and we will pound continuous training into our team like no other bank of our size has EVER done.

4: We Will Walk the Data Talk

Our poor branch people are getting email Excel file lead lists to make outbound calls and a clunky tracking system to track referrals. Meanwhile, we are using an old MCIF built when I was in graduate school. I have met with our CIO and we both agree that a grand CRM vision is not the answer right now. However, we have agreed to mutually fund a replacement of the MCIF with a version 1.0 of CRM that will simply be focused on customer relationship data, contact management and lead management.

Our data focus will initially be on big wins in improving penetration for our credit cards, mortgages and wealth management for small business owners. From there we will evolve and become more sophisticated, but first we kill the spreadsheets!

5: Everyone Will Be a Digital Banker

Going forward, we will kill the flawed assumption that people want to come exclusively to branches to have meaningful conversations. The truth is all customers will take the easiest route to need fulfillment as long as they are comfortable with how to fulfill the request. So our customer engagement strategy will be digital – period. It may be through a mobile phone, through an email from a private banker, an outbound business banker with a tablet, or a chat in the contact center.

No matter what the interaction, we will be loaded with organized content, contextual Web landing pages and e-signature approvals every step of the way. The branch is NOT where our customers come to see us. The branch is a place where bankers engage digitally as much as physically and rest up before heading out in the market to meet new customers.

6: Value Contribution Will Replace Widget Scorecards and Metrics

Our bank will not be killing all incentive plans because of Wells Fargo’s greed and idiocy. I personally have no ethical issue with performance-based compensation around production when it’s done right and uses common sense. I want to kill our current “matrix of hell” scorecard and replace it with a well-designed plan around value creation. I will be working with our HR and Finance groups in the next three months to be ready in January to roll out a plan that pays employees incentives based upon the estimated Economic Value Added or EVA of each product at different size tiers.

Our performance compensation will be based upon development of EVA with harsh penalties and disqualifications for any risk or compliance issues. We will encourage our bankers to build a book of business over time, and they will share in that value creation. We will no longer terrorize our people with daily sales pressure. Our smart, digital bankers will figure it out if they want to succeed in our culture.

In terms of executive-level metrics, we are dumping the monthly branch profitability reports. Our sales-per-banker-per-day metric is history. Instead, we will be playing for the long term with metrics around the following:

  • Delivery System Production – We will track our volumes and EVA production across all channels and by banker and team. Importantly, I hope to triple the volume of retail revenue creation through our digital and contact center channel over the next five years.
  • Delivery Cost – We will be tracking measures that ensure we are managing our overall delivery costs, including cost-per-transaction and cost-per-loan. These metrics will help guide our capital and operating expense reallocation and help us afford new strategic investments.
  • Experience and Usage – We will be obsessed not only with our Net Promoter, Referral and Retention scores but also with the critical insights we will gain by driving a serious “voice of the customer” culture. To that end, we will keep a map of our 18 Customer Moments of Truth across all channels with a Red/Yellow/Green status and key improvement activities we are focusing on in each major process.
  • Value Creation – We will replace widgets with the concept of risk-adjusted returns on capital and relationship revenue development. A simple initial metric will be revenue-per-customer. There are so many win-win opportunities with our customers that can drive this metric higher it’s insane, and I know just the smart digital bankers who can do it!

Retail bankers are at a crossroads, and only those who face reality as it is and relentlessly work to create value in new ways have a shot at the future. You can throw Zippy Roth’s 300-page sales playbook away. It’s time to modernize our delivery, get smart, go digital and have fun as banking professionals again.


Author’s note: A shout out to Mike Rechin, CEO of First Merchants Bank in Muncie, Ind., for saying the wonderful phrase, “Smart people with good hearts who know how to execute.”

Ready to ditch Zippy Roth’s 300-page sales playbook?

Bring in the experts from Cornerstone Advisors to develop a new strategic plan aimed at a profitable, predictable future.

Visit our site or contact us today to learn more.



Filed under: Branch Sales & Service, Call Center, Retail Banking, Strategy, Web & Mobile Banking

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