How to choose the right credit data provider (and avoid vendor lock-in)
Credit risk data is essential to every credit provider, that’s why making the right choice is an extremely important one.
Yet, credit and procurement teams too often feel restricted by the main credit bureaux, due to feeling “locked-in” by because they’re often tied in to contracts through their platform choice, which in turn prohibits cost savings. But there are options available, and ways to negotiate the best price and quality data for your credit risk programmes.
As co-founder of data benchmarking consultancy, PurplePatch, I have a unique perspective when it comes to choosing a data vendor. Buying credit risk data requires transparency about the pricing, coverage, quality, and compliance of data sets, and flexibility around choice of risk platform and additional data suppliers, such as multi-bureau. To help with this important decision, here’s our guide on how to choose the right credit risk data provider -while avoiding vendor lock-in
Overcoming the cost of change
Over the last 20 years the top three bureaux not only had the most data, but they were also ahead of the field with their decision engines, which most banks and financial services firms bought as part of a contract together. This essentially locked firms into long term contracts with little flexibility on price or terms. This makes it feel hard to leave and move to another data or platform provider.
Since then, there’s been an exponential rise in SaaS based decision platforms, creating more choices for credit providers. Many offer highly specialised systems that address key gaps in the market, and can be less cost prohibitive.
However, many credit providers feel the cost of change is too high or complex to leave, which means they end up remaining locked-in to contracts that are less favourable than they’d like.
But there are options available. In an ideal world, companies should be able to “lift and shift” freely as they want –migrating data from one technology stack to another, adopting a multibureau approach between competing vendors, or changing data supplier entirely.
While some vendors make it particularly difficult for companies to migrate data off to a competitor’s stack, we’ve found at least one of the top bureaux are embracing this approach. With more forward-thinking contracts providing flexible access to data and unique open banking value adds they’re certainly ahead of the game when it comes to addressing their client’s needs.
In short, in order to essentially ‘break chains’ with large lock-in contracts, you need flexibility and choice.
We’ve worked with a number of lenders to embed this flexibility in contracts. From multi-bureau approaches, to changing decision platforms and even loosening future needs.
Aside from buying data, if you are purchasing other risk and compliance services such as scoring, identity verification or Open Banking, we recommend comparing each of these individual services for elements like product quality and service.
We can provide impartial guidance on this, comparing more than 80 performance metrics. Sometimes, buying bureau data and products through a niche provider or value-added reseller (rather than going direct) can be a better option.
This gives you the choice of using flexible decision platforms from cloud-based niche providers (for cheaper setup and updates) and the ability to go multibureau – which increases buying power. Plus, the bureaux purchase sanctions and compliance data from third parties, as well as authenticate apps and Opening Banking facilities.
One thing to bear in mind is that the bureaux are buying up these niche companies as they value add. But also, because it helps protect their ability to lock in and charge more than they should. This something we keep a keen eye on, so that we can continue to provide a thorough and fully transparent service.
Checklist: Choosing your credit provider
Here are the key things to look for when choosing a credit data provider:
e Conduct a comprehensive data quality comparison, including coverage (UK and overseas)
e Get evidence of strong customer relationship/service
e Ensure the supplier is at the leading edge from a compliance perspective
e Make sure they are offering transparent pricing and maximum discounts
e Understand each suppliers unique selling points
e Embed contract flexibility to cater for under-usage, minimum commitments, and reduced terms.
If time and resource is against you, the quickest way to get this information is through a data benchmarking exercise. We can help with this as we offer FREE benchmarking assessments for credit providers to ensure they use the best quality and priced data.
How to successfully negotiate the best deal
Along with benchmarking, we’ve found credit providers and procurement teams get the best terms when they have the confidence to achieve cost reductions, despite the bureaux pushing back. After all, every organisation has a budget and needs to spend it wisely.
. Here are a few things that can help:
· It’s important to do your research and gather multiple quotes. Being armed with competitor quotes creates great leverage.
· Review your past transactions for any overcharging and under-usage can be monetised.
· Involving C-level executives can help escalate and finalise negotiations.
Failing that, serving notice shows the seriousness and can result in better pricing.
??For more tips, read our blog: Is your bureau charging you higher costs than your competitors?
Why PurplePatch?
As independent advisors, we have worked with a wide range of customers and suppliers and negotiated hundreds of agreements – saving between 25-40% on credit data costs. By overcoming many of the pitfalls that credit and procurement professionals have had to face, PurplePatch ensures relationships are underpinned by clear mutual benefit on both sides. We are so confident that they will be able to save money, services are provided on a shared-savings approach.
No one else offers this service.
For your free data benchmarking assessment, get in touch: [email protected] or send me an InMail.