What is an RFP?
RFP is the acronym for Request For Proposal. It’s a term heard often in connection with your vendor relationships. We’re on a mission to take them down. And by the end of this article, you’ll want to help. Take an adventure with us. Oh, here’s our RFP before we go.
Wikipedia defines RFP as such:
A request for proposal (RFP) is a document that solicits (a) proposal, often made through a bidding process, by an agency or company interested in procurement of a commodity, service, or valuable asset, to potential suppliers to submit business proposals. It is submitted early in the procurement cycle, either at the preliminary study, or procurement stage.
Holy run-on sentences, Batman! Ok, what did that even say? Here’s our version:
A request for proposal is a bid for a product or service. It’s created and sent before even knowing the company’s pains or needs.
Put that way…why even bother? Oh, right, information. RFPs are the industry’s go-to tool for procurement since, well…always. Financial institutions use them to gather information and pricing on a desired product or service.
The RFP has a deeper purpose. It helps the financial institution learn how to prevent or address a specific challenge. Additionally, it lets them “peek in” on solutions that vendors develop, then deciding if any might be a fit.
Could there be a better way? Keep reading.
RFPs As Compliance Tools
RFPs serve a primary purpose for financial institutions: Due-diligence compliance. Regulators recommend their use to avoid appearing partial.
They also provide important insights into the companies. Data such as:
- Vendor financials
- Financial health of the company
- Data Security
- Fraud prevention
- Customer service
That’s all good. Before signing any contracts, it’s essential to be confident and informed in all these areas. However, why spend the time and energy reviewing any of this before knowing if that company’s product might solve your problem?
The main concern of a regulator is minimizing your risk and maximizing your compliance. They’re not focused on helping you find the best company or product for your institution’s needs. It’s not their fault. It’s just their job.
Stuff Your Mind, Not Your Inbox. Get the info you need a couple times a month.
RFPs As Catch-22s
RFP’s are your proverbial catch-22. Your institution needs to solve a problem. Thus, you must request RFPs. Those who answer your RFP aim to solve a problem. Is it yours? You can’t know, because neither party has discussed it yet!
This knowledge gap makes for a disjointed execution, wasting time and resources for all parties. The purpose is good. The execution is lacking.
The RFP process does your financial institution no favors. It puts providers at a disadvantage in sharing the best solution for your challenges. No one wins. Why still use them?
“Because that’s how we’ve always done it.” “Our regulators insist we do.”
Change happens. Quite a bit, recently. So is this still the best strategy to ensure your institution finds the best product/service fit? And does so at the best price?
Or, are RFPs a compliance-driven relic, like interstitials, restricting your progress and innovation?
Let’s give them a fair shake with a closer look.
RFPs Can Reduce Transparency
Ironically, the very practice which is meant to increase transparency can be the one which diminishes it.
Lean closer, I’ve got a secret to share.
Financial institution product and service details are kept from you on purpose. NDAs and “old boy” networks rule. Sure, you might get a high-level features PDF from a company, but any more and you’ll have to schedule a meeting.
Why? Because they want to control the conversation.
Knowing your institution will share an RFP, they are prepared to reply with the sparkle. That puts them in the race. Earning the meeting is the goal of their response. Hence why you receive lots of features and benefits, but not too many details.
It’s not nefarious. Drafting both an RFP and a proper response takes time and resources. Your institution may even reuse older RFPs to save time. That may work counter to your goals, considering the pace of change in the banking world.
When your “ask” to potential providers isn’t exactly what you want, how can anyone start on the same page? More time and energy to bridge that gap.
Financial Institution Issues With RFPs
Who creates your RFP? How is it done? Most likely, a staff member puts together the document to the best of their ability and knowledge. Of course, that knowledge comes from previous vendor experience. Thus, do they really know what’s possible or available?
That can also mean the RFP is biased towards the incumbent.
Not a great start for compliance.
RFPs look to get suppliers involved in the process. They solicit information from those who can provide a product/service, not solve a problem. And yet, that’s the real challenge your financial institution is looking to address. You don’t want a product. You want a solution.
When the RFP highlights the tool, even your potential vendor cannot provide suggestions, customizations, or guidance towards your goal. By missing these insights, your financial institution loses an opportunity to improve their ask.
In simple terms, if you ask to see shovels, don’t be surprised when your response includes those the size of a car and others meant for tiny potting efforts. Neither is much help when you just want a standard garden shovel. But can you blame the suppliers?
A main purpose of RFPs is to ensure competitive pricing. Sometimes, that’s the only reason, and we’ve seen financial institutions issue them just to get a snapshot on product pricing.
Of course, you know that this kind of comparison may not be fair, nor accurate. Your institution and members could lose out on important capabilities because of a higher price tag. Or, the low-cost option turns out to be a terrible fit, since their lower price is linked to limited services.
When each company uses different ways to stand out, it’s not apples-to-apples anymore. The time everyone spends is wasted.
Hold up. Can’t you just search?
You have access to the world’s information in the palm of your hand. In fact, you don’t even need to move. Just speak! Siri and Alexa can answer questions across an enormous range of topics. Today, we all can be as informed as Jeopardy champions.
Searching online is commonplace and, frankly, indispensable. How did we ever learn anything before them? Oh, right, encyclopedias and libraries. We encourage you to check out the latter…today’s libraries are fun educational portals, even digitally!
Where was I? Let me search for the way back. Ok, Google, what comes next? Yes, online searching!
Search to Shop
No matter your question, use the verb to find the answer. We “Google it” now more than we ever “made a Xerox.” And it’s a powerful tool for purchasing. Today’s shopper is educated and savvy.
They read “Ultimate Guides” on a topic, look up “pros & cons” to understand its role, and scour “Best of” lists to narrow down their choices. And that’s before ever looking at reviews or even product specs.
Looking for a pair of shoes? A few searches lets you find the right combination of style, color, materials, fit, and pricing. People do this for big purchases, too. (We’ll assume your shoes cost less than a typical car.)
Need a new refrigerator, or even considering a swimming pool? Your first step is searching online: “What are the most reliable refrigerators in 2020?” “What kind of pool do I want for my house?”
Search to Learn
Looking for advice online goes beyond buying. If you have a specific problem and don’t know the answer, what do you do? Search. The results provide many possible causes for your specific issue, and share countless “how-to” DIY videos to fix.
I solved an issue with my shower handle through an online search. 5 minutes of searching and watching videos. 5 minutes with a screwdriver. No plumber required. And in case you don’t know me, that’s saying a lot.
Consumers today are more educated on the products and services they buy. Honest, unbiased, and transparent insights to assist with buying decisions are an essential part of the shopper experience.
Education Creates Empowerment
Think about the last time you prepared for a purchase. You didn’t just hunt down the cheapest version and click “Buy”. You researched it! Perhaps you even visited some of those “Best of” or “5 steps to choosing” articles and videos.
Maybe you dove deep with “The Essential Guide to…” Nice work.
By the time you were ready to make the purchase, or, if it was necessary, speak to a salesperson, you were confident. Nowadays, it’s common for the consumer to know more about a product than the person selling it!
That new knowledge helped you ask important questions, ones you would not have known to ask otherwise. Turns out, a fiberglass pool makes more sense than a cement one. No need to even bother looking up cement pool installers. Time saved.
Still thinking of a new refrigerator? With that small kitchen, what will both fit and be a reasonable price? Easy, just read the Best Small Counter Depth Refrigerators for 2020.
You now have more information than any one manufacturer could or would provide. Plus, you’re able to control the discussion, maximize your time, ask specific questions, while ensuring your choice is the best fit for your needs and budget.
Ok, you got me. This is about your financial institution and RFPs, not a pool or refrigerator. Why bring them up? Because those both linked to companies that, if you are in those markets, you will likely reach for their honest guidance.
And if your process demanded RFPs, you would have missed all that information. Might you have chosen a cement pool? Or the expensive, yet under-featured, counter-depth refrigerator? Maybe. Isn’t it better to have all the information?
Be Like Macy’s Santa
Across the B2C market, companies are seeing the light of honesty and transparency. 91% of B2B marketers and 86% of B2C companies use content marketing (that’s the name for this kind of strategy).
It’s most often expressed with a learning hub (dare we say “library”?) that helps answer questions their customers may have about the products they offer. Even if it means sending that person to a competitor.
Why bother? Because, as we pointed out above, people educate themselves. 47% of shoppers view at least 3 pieces of content before engaging a salesperson.
Remember Kris Kringle from the classic Miracle on 34th Street? He shocked customers and management at Macy’s when he referred a child’s parent to a competitor to find a toy fire engine.
Why? Because Macy’s didn’t carry it. He served the customer. Even if that meant telling them not to buy from them.
When he asked the mother if she agreed, “Oh yeah, sure, but I didn’t know Macy’s did.” They needed Santa Claus to show them plain good business.
That was disruptive in 1947. It’s still disruptive today.
Companies Doing Content Marketing In Financial Service Industry
Unfortunately, this practice isn’t common in our industry. Many companies have blogs and resource hubs. Some share videos. However, we can find no other companies providing honest information, without also tying it directly to their products or solutions.
We’re out to change that.
This Learning Library is our contribution to bringing more transparency to the industry. It answers your questions on a range of products, as well as sharing recommendations on operations and efficiency.
All the content is original, and as honest and unbiased as we can manage (we update if bias is found and to stay current). You can browse through articles, videos, eBooks (the “Ultimate Guides”), white papers, cheat and sheets.
It’s open 24/7 and we never hide any information behind a requirement to set a meeting.
Yes, we offer many of the products and services covered in our Learning Library. However, we get that our offerings may not be a fit for your institution. No RFP needed. Our goal is to help you learn the questions and answers you need to find your best fit.
If the ideal toy fire engine for you is down the street, that’s what we’ll say!
You Ask. We Answer. No RFPs Included.
Due diligence is serious business. And we want to help you get it right. An RFP on a product you didn’t get to research ahead of time will invariably be counter-productive. Everyone’s time is valuable. Let’s make the most of it.
We believe that education is power. When your team can acquire the knowledge, you’ll open doors to greater innovation, efficiency, and ROI. And let you better achieve your mission of serving members.
Take our honest approach for a spin across our Learning Library topics. More are added every week. Subscribe to get department-specific messaging that will never spam you.
Until next time, keep it honest!
Blogger. Speaker. Part-time Jedi.
Focused on helping your bank or credit union grow in the face of emerging challenges.