Banking on Digital Growth
Banking on Digital Growth

Episode · 3 months ago

173) #NewStartsNow - Why We Need to Ditch Exclusivity Clauses

ABOUT THIS EPISODE

Core vendor contracts commonly contain exclusivity clauses that actually prevent banks from growing.

That fact shocked today’s returning guest, Jeffery Kendall, Chairman & CEO at Nymbus, when he first found out.

So, he took to LinkedIn to write an article entitled, “It’s Time for Core Vendors to Ditch Exclusivity Clauses.” In this episode, he explains why he wrote it and why vendors need to embrace a true partnership mindset.

Join us as we discuss:

- His motivation for writing the article

- The difference between partner and vendor

- The importance of holding yourself accountable

- Actionable advice for improving partnerships

You can find this interview and many more by subscribing to Banking on Digital Growth on Apple Podcasts, on Spotify, or here.

Listening on a desktop & can’t see the links? Just search for Banking on Digital Growth in your favorite podcast player.

It blew my mind that you could somehow have a contractual relationship with someone that would eventually prevent you from growing or prevent you from exploring, or prevent you from innovating or prevent you from testing. You're listening to banking on digital growth with James Robert Leigh, who believes there is no better time than now to educate and empower financial brands to gain a fresh perspective around future growth opportunities. That's why today's episode is part of the new starts now series, brought to you by Nimbus, who offers a complete set of tech tools and services, all designed and engineered to empower you and your financial brand to maximize your future growth potential. Greetings and hello. I am James Robert Lagh and welcome to the one hundred and seventy three episode of the banking on digital growth podcast. Today's episode is part of the new starts now series and I'm excited to welcome back Jeffrey kindle to the show. Jeffrey is the CEO of Nimbus and is committed to helping financial brands delight their members and customers with best and class digital banking solutions. Welcome to the show, Jeffrey, so good to have you back on as always. Buddy, it's always fun talking to you. I there's never any shortage of fun things to get into and connect on her. So thanks for having me on again. No, there's not. We actually just spent thirty minutes. We probably should just sit recorded. We could have gotten two conversations out of this one. We're going to have to come back and talk about what we're talking about before, and I'm not going to tell anyone what that is because it's I think that'll make for a really good, good dialog and discussion, just like today, because you are a really interesting article that it hit a lot of buttons and it got a lot of good feedback to and before we get there, I want I want to want to start off on a positive note. As always. What's good for you? Man? Personal, professional? It's always your pick to get started. Oh,...

...man, well, you know personal that. You know mentioned it. Today's Valentine State. I don't know we're supposed to say that case it gets like a week that before I think. I think this is going to come out about three weeks later. So, for context, is Valentine's Day. It's Valententiz's Day, which is my anniversary. So that that's a that's a fun celebration of eighteen years together with my wife, and so that's what's top of mine for today and looking forward to being able to spend some time together with herd tonight after after we all done work. It so absolutely and it is, it is important that we take time to disconnect, to reconnect with those who we are closest with and spend time with those that you love and and I think this, this is why I'm going to love this conversation, because we are getting to spend some time together. It was an article that you wrote. Let me it was called it's time for core vendors to ditch exclusivity closet clauses. You posted this on Linkedin fifty comments, a hundred sixty five, like really really gives good conversation that was coming from it. What inspired you? What was what got you this place to write this to begin with? You know, it's funny. This has been sort of irritant, pet peeve, whatever you want to call it, for for a few years for me now. And what's interesting is I'm not a career backer. I'm new to the banking GIG and I was in healthcare most of my career prior to this, but without five six years ago, as I started understanding the financial services space and learning more, I sort of started seeing this dynamic where banks were actually sort of having to agree to contractual terms for software usage. This very unique to financial services and and and I remember trying to work with a couple different banks when I was with my former company, cony, and we wanted to pursue some new strategies. Wanted to launch a new digital product for one of them and they came back and they said, man, we can't do it. I said, you know, what's the issue? Well,...

...we have an exclusivity clause in our contract with by serve and we you know, they say that we can't use another digital provider to do something. I said, yeah, but it's totally different. That wasn't anticipated, like this isn't even really competing the like. Yeah, but the language is so strict that we could put ourselves at risk and be sued, you know, by our supplier if we if we do this and granted. You know, I was biased because I wanted to do a project with a customer and I was motivated to do that. But it blew my mind that you could somehow have a contractual relationship with someone that would eventually prevent you from growing right, right, or prevent you from exploring, or prevent you from innovating, or prevent you from testing and understand it. And what what was so shocking to me about it was that I learned that it's really, really common in contracts, in particular core contracts, but also in digital banking and some other tech contracts. And what always bothered me about this as sort of it says, as Valientide stay, we'll talk about relationships. What if you had to do would what if your spouse had to be with you just because of a legal obligation, not because they loved you? And that's where I got I started done again and said cheese. Wouldn't it be better if this core provider, and or this digital banking provider in this case, superspicor? It's like, why don't you win the hearts and minds of your customers by performing well and doing great things and making them love you, versus having to sort of go back to a contractual term saying this is the thing that prevents you from exploring other alternatives and I thought something needs to change here. So I think you're onto something, because it is ontimes. They don't like where this is going and we can we can go back and we can look at, you know, some some aged literature, covenant contract, and I think this idea of a contract contract is something that you can get in and out of. Covenant is really more of a promise, right and my wife and I, we...

...do marriage preparation, another Valentine's theme. We do marriage prep with with couples, and we talked about this idea of covenant and contract and I'm curious here because you know, bringing this back into financial services, into banks, into credit unions, partner and vender, and you even noted that this in the article of your title. These are these are two words that I here get thrown around a lot when it comes to technology, for example, tech players. They want to be viewed as a partner. Financial Brands, though, refer to that relationship typically as a vender, and I'm really curious because when I think about vender, I think about a vending machine, it's transactional, or some person at the ball park selling beer and peanuts. So I got a two part question for you, what's the difference in your mind between partner and vender? And then how can financial brands begin to view technology? Not through the lens of a vender, because I think that is so limiting, but more from the lens of a true partnership or even what we were talking about before, a covenant or of a promise. Yeah, so for me, partnership always comes back to alignment of interests in the sense is saying we are both going arm in arm to share success or failure together. And what what the vendor, supplier, vendor, customer, supplier customer relationship often looks like is and this is really really prevalent in software in particular. I'm sure it's it's in other industries as well. But Number One, if you've gotten look at Harvard business reviews around failed I t projects, their massive yeah, I think I don't have a data point exactly, but six and eighty, sixty to eighty five percent is typically what we're seeing from like BCG and Bain...

...and, you know all of these other big consulting firms, which is actually worse than the success rate or the probability of divorce. Coming back to marriage, your relationship, you know the divorce rate is roughly fifty percent. And what's interesting about that and those numbers is what is our mindset have to be if we're going into something with a fifty to eighty percent risk of failure? Right like we just tend not to take those kind of odds and risks in life in general, but companies and banks are forced to because that's sort of how they've been trained to buy, by tech vendors, by suppliers, and so what bothers me a lot of times, and I've seen this on you know, to be open, I've seen this on the software provider side, which is a customer comes in, they spend a ton of appreciable money and then the software sets on the shelf. The software supplier still gets paid, they still get to grow, they still get to claim it as a as a customer, as a logo that they have, but there's no real success being driven together by the project. And so when I came to Nemas, one of the things that was very important to me is I said, you know what, there's a way to do business different. What if I could create commercial terms and models? That said, you know what, if my customers not successful, I'm not going to be successful. Like in order for us to grow as a company, the way that we have our contract structured is, hey, when you grow, weeper and and if you don't grow, then we don't get the to enjoy the success to that either. And I've been really proud of the company for doing that, because it makes sure that, like when we wake up every day, we're actually thinking about, like, how how fast is our customer growing? Like, what can we do to help? What can we do to get in? And that to me feels more like a partnership, because it's not what of my products can I give this person to make them successful? I might grab somebody out of our marketing and team, out of our Nibas labstatement say hey, we need to huddle real quickly because we need to, you know, come up with a new strategy or go to market for this digital bank to get it to grow faster. And I don't think software companies tend to think that way just...

...because there's no motivation for them, there's no alignment of interest to the customer that would let them make those kind of decisions, and I think it's a travesty. Yes, and and there's that idea of partnership vender, covenant being a promise versus contract being something that you can get in or out of, covenant being a promise that we're committed to playing the long game here. And so this idea of partnership, I think, closely lines with another other P word that I'm personally very passionate about, which is purpose, because if we're going to go forward on this journey and we're going to be co committed to create something bigger than the present moment, as will call them individuals. I mean, once again, that's kind of like what marriage is. You're taking two individuals. Man, there are so many Valentine Day themes coming through here, relationship themes. It really is in and yeah, you take two individuals and you bring them together, two brands, you bring them together to create something even bigger. It's that collaborative model, one that I view as one plus one equals eleven. I think what let's take a step back, because where, where we've been historically has been rooted in a lens of scarcity. I think that's the competitive model here right is. It's scarce resources, so we're always going to be fighting for something. But I don't think that we're ultimately going to win and and grow out of that. What's the opportunity to flip the narrative, to go beyond scarcity and competition to one of what I view as a world of abundance where there's plenty to go around, and it's if we if we can all operate from that Inns. Collaboration is just a...

...natural output of that type of thinking. No, I think it is, and I you know, one of the things that we learn a lot from our customers is our customers introduced us to other partners that they partner with well, and what I love about that is when you pick the right partner, it's an alignment of the right mindset. It's it's never about the tech. This is the heart. But this is a hard conversation. Again, as CEO of Software Company, I'm like you know, and I say this a little bit tongue and cheek, which is like, I don't really care what our Apis are written and I don't care what cloud platform it's on, and it that's all interesting, but at the end of the day that doesn't make a bank successful or not successful. It may make it easier or less and there's, you know, I'm sure that you could have a debate about that, but ultimately, at the end of the day, what makes a company successful is that they have the right partnership mindset. It means when they when they come up against something unknown, it's not like there's already a predescribed playbook on how to do it. It's the fact that they're like, you know what, I care about this customer, I care about their success. I care that this executive sitting across the other side of table made a bet of their career on me. Like you got to feel that in your bones when you're when you're a partner, and that's where I think what we've done a really good job. I think at Nembas from a culture perspective, is bringing on people into our team who care passionately about I just looked at customer in the eye. They told me what they needed and I'm going to do everything in my power to make them successful. And it has nothing to do with the tech, it has nothing to do with today's episode of banking on digital growth is brought to you by Nimbus, who believes in creating even better financial services for all, better access, better experiences, better value all while supporting the entire customer journey. And how do they do this? Offering end to end niche banking solutions that you can buy or build, providing accountability beyond the technology and prioritizing and pactful, intentional innovation instead of chasing features, ready to...

...transform what is and create what's next. Learn more at nimbuscom. I think you're onto something here and it's something that I've been thinking about when when framing out the next book. Banking on change, and it comes back to what we were talking about before, with digital transformation projects historically having an abysmal success rate or a high failure rate, and it's because, I think, the thinking and the commitment has been so much around ones and Zeros to where, if we flip that and we focus on human transformation, the people's side, human transformation must proceed digital transformation, because digital transformation loan historically we struggled with. But if we can really focus on the human element human transformation, you know a lot of there's a lot of talk about centered design and I'm more interested in human centered growth here. Where might are what has historically held human beings back from connecting and collaborating with each other. I mean, once again, it's February fourteen. Yesterday was the Super Bowl. It was a competitive event. Is this is this rooted and cultural? I know we're can I go on deep here, but it's just these are the things that I think of. This is it's what keeps me up at night. It's more of the human aspect, because if we get the human aspect in, the human element right, the technology, I feel, will just easily fall into place. It will be a tool to make things even that much bigger, better brighter for us all. Yeah, I mean I think that the competition is is you know, when you have competing interest that could be good in a way for the market. Right. The fact that I sort of see Nembis, as you know, part of our values that we bring good software and...

...good solutions to the to the market, and I believe that. But part of my job too, is to push the other suppliers who, you know, they're going to be thousands of thousands and thousands of banks who never do business with Membas. They're going to do business with the legacy players. But the value that I can add to that equation is if I become a Gad fly and start pushing the other court providers to do things differently too and to help them change or could at least create a voice in the market. That is we don't have to just take this for granted. We could do it differently. Maybe you're not going to do it differently with us. That's okay, but if I can make your existing relationship better by making that other partner think about partnership differently, then that I take success in that in or reason I say that is in some ways I compete with those companies and I want to win and I think that we have a different approach and that's just natural and business, but in some ways I kind of feel like I'm helping them. Yeah, and, you know, by calling out some of the stuff that maybe gets in, because I have to just point out something. I was blown away last week. I was, you know, it was seven o'clock at night, I was enjoying a glass of cabinet and relaxing as the day was unwinding, and I started listening to Jack Henry's earnings called from the earnings called for the quarter and I was blown away because one of the first things that was mentioned on the earnings called by the CEO David Foss was that that the company was excited that they had grown the D conversion fee revenue for the company to twenty five million dollars for the quarter. HMM, and my head started spinning right right. I was like, wait a minute, you you're happy that number one customers are leaving you, because when they leave, that's when they pay de conversion fees. The second thing is you're totally fine with monetizing the fact that people are leaving to go to someone else because they're unhappy with the relationship that they have. And I'm not picking it and any of the core providers would have the same church of structure side. But I...

...just I never heard that before on someone's earnings called that that was like hey, we're going, we're doing great, we're growing strength. Twenty five million dollars a deconversion fees out of like that blew my mind and what it did is it set up for me going like wait a minute, that's the wrong mindset, that's the wrong attitude. It should be it. In fact, if you have to charge decomversion of these, you should be actually ashamed to the fact that you're getting that much deconversion and that should be telling me that something's wrong. And it just goes back to the fact that sometimes companies get so big that they get into everything gets driven by contract versus mindset and partnership. Yes, it is a partner mindset. You would never, ever, ever even think that way. HMM. So and so that was like sort of a real data point in the world that got me thinking, like man, there's got to be a better way for us to do this well, and I think that there has to be an even better way to move forward, because there's that phrase. It's one that sends chills down my spine. We've always done it this way. We've always done it this way and and maybe I'm just a contrarian. And you know, I've been in the space for twenty years now and I've always there's the old what Robert Frost Poem I saw a ninth grade and it hung in miss bungoes English class and it was to two roads diverged in a yellow wood and I took the one less traveled and that that has made all the difference. But I always looked at that, that poster, and I'm like, I want to go down the middle, I want to go blaze a trill. It's never been blazed before. It's probably going to hurt because, you know, the Path is not clear. I'm more interested than that and I'm curious because one of the things that you noted in the article this idea of like industry standards. What can be done to help transform this conversation to go beyond this? Is the way that we've always done it or, quote unquote, these industry standards that have been...

...the status quot for the last, you know, few decades. Where do we go next? I think part of it is that the industries needs to start having meaningful dialog around these terms and it needs to be done outside of the context of an individual deal or not. And so in this buying ecosystem, right there are, you know, on the one hand, you have the banks, who need technology and that that's just part of what they need to operate and run their business. You have the the technology providers. Then you have a whole army of consultants that are out there mmmment process in banking, especially in community banking, where resources are thinner than megabanks, you're going to see a lot of engagement of consultants to come in and negotiate contracts between a technical provider and in a bank. And I think what needs to happen is there needs to be an honest dialog between those three groups. It's to say, okay, what are we comfortable with? Just sort of what are the norms of our industry that we're going to be comfortable with that help elevate us all. Yeah, and then one of the things that might prevent competition. And then one of the things that are going to make banks put banks at risk because they're locked into something that's not performance based, it's time base. Yes, that's going to be the preventative to growth. And so what I've been trying to do is develop relationships with the consulting side, saying hey, when you're a consultant, you are trained by the venders of going into the banks. That's saying, look, every core provider makes exclusivity part of their contract. I'm sorry, you're just going to have to deal with it. Well, if I can raise my hand and educate the consults and be like no, actually, we don't, we don't require it, then it gives them the power to go. You know what, you should negotiate that out because even if you don't buy from Membas they're willing to do it. So I think the more and more of the startups and the early stage companies like ourselves who challenge the status quo and stop being afraid of the big legacy players, I think that's where true change can happen. So, if you're...

...a bank, start betting on the earlier players who will partner with you. If you're a consultant, do your research and find those and if you're an emerging company, don't follow the big guys. Do things differently right make it so that you're more aligned with your customers, and that's where magical happen, I think. I think another output of this idea of collaboration. Back to your point of I just having conversation, having some dialog having some discourse and doing in a way that comes from a place of positivity, not of like you know, the world is full of negative me. I even open up the conversation, always a pen up every conversation. What's been going well, what's good for you, because it you, you can literally change the energy of a room, and I've seen it happened so many times to where the conversation will always go positive. I think about a time there was a financial brand I was coaching and their CFO came to me as a private dialog with her and she was like, I just had like the worst conversation with my CEO about something. I don't remember what it was, but I remember this and I said what, what happened? And so she told me. I said did you? Did you start off by asking what's been going well? She said no, you're right. It was like that moment of self awareness that it that that one simple question could have transformed the entire dialog that that transpired after after that initial question, and so I could see another opportunity here. Is that just the ideation and really kind of the rapid turnover of new ideas, but accountability can come through collaboration as well. Thoughts on accountability? Oh Man, it's so magical, but it's so hard to commit to because it's because you're being accountable right. It's it's sort of taking a bet and saying like hey, I'm going to do this and if I don't, then there's real consequences for me. I don't get the customer, I don't get...

...the contract, I don't get paid, you get go on. There's real things there and I think when you lean into saying like, you know what, I'm not going to make someone else hold me accountable, I'm going to hold myself accountable. Yeah, that's where real power comes from. So you can't make someone else accountable. Yeah, I'm a believer in that. It has to emanate from within themselves to truly come out that way, and so I think that's, you know, that's something that we as an industry need to work on. Is just, I don't know what it may be, pointing out our own B us a little bit more. MMM. Again, I'm on the I'm on the software vendor side, and this is probably one of the guilty parties in the in this equation. Is just, you know, we're really trying to sell stuff, we're trying to make new solutions where we are trying to help people. But you know, there's a lot, a lot of mistrust of vendors and suppliers and I think we owe it to ourselves to hold ourselves accountable to get rid of some of that perception in the market that's out there. And I think it comes from having open on his dialog like I made a post on Linkedin last week. After five serve announced the acquisition of Fins Act and Yep, Jack Henry made an announcement and I sort of just gave my, you know, take on it, which which I try to not be just an attacking people, but I try to call it as I see its s and are we really having the right conversation as an industry? And being that way, the amount of people that came to me in person. I went to a conference. Actually, I was at a conference during that. Like two days later, another CEO of a software company came up to me. He said, man, you now that you have the right thing. I'm so glad that you, you know, had the guts to say that. I was like, Oh yeah, is like I don't because I'm a partner one of those companies. They would have dumped all my business. So I was like that's what's holding you back from telling the truth, like and having this a hard conversation, is that you're afraid of that. And and I really I made a commitment to myself that. It's like, I want to be respectful and I don't want to be a jerk, but I want to make sure that this industry is having the right...

...conversations and I I'm not going to. I'm not going to succumb to the fear of pressures of larger companies and things like that. I think if we want to make change, we really have to we have to take an approach like that. You know, it's something that my wife and I in episode one hundred and sixty seven, she came on and it was all about truth and truth telling. And even Brun a brown, I mean she writes you can have you can choose courage or you can choose comfort. You cannot choose both. And it's this idea of two pass diverge in a wood and I didn't take the one less travel. No, I took you blaze your own trail kind of down the middle it, and it's one that does take some courage to make that commitment. But to me that's where the really big transformation happens and the really the three keys that I see for any type of transformation start. Number One, telling the truth, no matter how uncomfortable it is, about where you've been, where you're at, where you can grown next. Number two, getting the training, education to help others see what they can't see just yet because you're seeing something a little bit different. And the number three, simply taking time to just think about those next best steps forward based upon what you've learned, because it all comes down to a shift in perception. You know, you see something a little bit different, that will then help you think differently. That will then, you know, lead to different feelings and emotions, which will ultimately lead to different actions, behaviors, habits, and that then leads to the whole new future I think we're all working to create. We want something better for this industry. It all comes down to, I think back to the word that you mentioned, which is, in fact trust. Next Steps going forward for the dear listener, when...

...it comes to what we've talked about today, that they can do something small to make some progress on their own journey of growth and around the ideas that we've been talking about here. What would what would be something small that they can commit to do next look? For me, it's it's starting the conversations and sitting down with the people you consider to be strategic partners and saying like look, are we both really committed to this relationship? And I'm talking about the person who might be wondering, like you know, should I continue doing them business with this partner? Or Not right, and maybe you are. You're already there and you have a great partnership and that's amazing. Keep that going and but have those regular conversations about it. It stays like what is it about this partnership that is either working or not, and it's almost like, you know, I think it he to a healthy marriage is to have check INS. Yes, like hey, and it's got to be done during a time when there's not a problem. That's like one of the most important things I've learned about having conversations in marriage is like, if you try to address the problem that you're feeling the pain with right now, it becomes very hard to be objective about it. You have to create some distance between what happened and then being able to really look at it and have a open dialog. I think that's a lot of times where vendors are so don't don't try to have that conversation when somebody just messed up and there's a you know, an issue that has to be taken care of. But sit down on a regular basis with your partners and just say, what are you getting out of this? What do you want me to get out of it, and how do we make sure that our interest to aligne. So my wife and I, you know, one of the things that we said early in our relationship, you know, before we get married, and we had a formal like six and a half your courtship. Are we are we doing this because we're comfortable? Like are we getting married because we're comfortable? And it was really like just the honest conversation. And then after that, you know, we had some challenges and struggles and marriage and we get into marriage counseling and then back to your point, it's having those continued check ins. Even now we'll...

...still go see the the marriage councilor and it was so funny, like one time we were going to go and it was just a check in and then some conflict popped up and I'm like this is like of like, are you serious, like we have to go now deal with this conflict because we're just going to go check in. But I think that's that's another key takeaway with all of this. Sometimes an objective third party can help facilitate a dialog to where we're just so close to whatever it is that we're dealing with, you know, in a relationship, and that's what this is all about. It's just about secular lationships. By the way, I'm just going to say it. I think you could help be the third party helping bring partnerships together with banks and partners. So well, it's something that's yeah, it's definitely, definitely, definitely in my mind, because it's all about connecting people to do even better. One plus one equals eleven. Jeffrey, great conversations, always a someone was to connect with. You continue to the dialog, the discussion that we talk today. What's the best pay for them to do that? Linkedin. That's that's the easiest wayer. Email. Jake Kendall, nimbascom. Connect with Jeffrey. Learned from Jeffrey. Jeffrey, always a pleasure, man. Thank you so much for joining me in another episode of banking on digital growth. Hey, thanks a lot, dry Robert. Had a great day as always, and until next time, be well, do good and make your bed. Thank you for listening to another episode of banking on digital growth with James Robert Lang, brought to you by Nimbus, who was on a mission to bring the full process and technology together to create new roots to growth for financial brands and enable them to deliver outcomes. To learn more about how you can collaborate with Nimbus to maximize your future digital growth potential, visit www dot nimbuscom. Until next time, be well and do good.

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