Bureau data contracts: 4 questions you should be asking

Negotiating the right price and quality of data for bureau contracts is essential for credit providers. Despite this, many organisations are unaware that there are differences in pricing and do not have the knowledge or information needed to negotiate competitive pricing or the pricing that works best for them and their customers.

These negotiations are key to credit risk and procurement teams reducing onboarding costs, increasing profit and enabling a wider reach in order to attract new customers and incremental value.

That’s why a major change is needed to negotiations. Credit providers should feel empowered to challenge pricing. And to do this, they need access to transparent pricing industry-wide - which has long been a blocker that bureaux have hidden behind. With a clear view of pricing and quality of data available it reduces the chances of some organisations having a competitive edge over others and being able to offer a wider range of options to consumers.

Four key questions to ask when negotiating bureau contracts

Here are the top four questions we recommend asking when negotiating bureau contracts. 

1.   How does your pricing compare to others in the industry for the same data? 

Knowing how much others are paying for the same data and spend footprint can help you to understand how much you are paying in comparison and provides you with a benchmark with which to negotiate.

Traditionally, there has been a lack of transparency in terms of pricing and data contracts between credit providers and Bureaux. This has led to huge differences in flexibility of contracts and how much organisations pay for exactly the same products. However, with more organisations and the FCA becoming aware of these differences, it’s important for credit risk and procurement teams to have the knowledge required to negotiate better prices.

2.   Do longer term contracts provide better pricing?

Signing a longer term contract with your chosen bureau does not always equate to the best pricing so this is something that credit risk and procurement teams need to be aware of. Being tied into a longer term contract can also prevent negotiation on lower pricing throughout the term of the contract.

3.   Does the contract fit into any possible multi bureau strategic plan that would optimise data quality and pricing?

Combining more than one bureau can provide better information quality and coverage whilst helping you to save on overall costs. So, when negotiating contracts, it’s important to ensure that it will fit into a longer term multi bureau strategy. A multi bureau approach can help to save on costs, provides a more comprehensive data set and provides you with access to better pricing.

If you’re looking to take this approach, the contract will need to include ‘stepped pricing’ or pricing for primary and secondary, based on lower and higher volumes. This is a great way to reach a higher percentage of the active credit market and make significant cost savings.

4.   Is the contract fit for purpose?

In such a volatile market, procurement and credit risk teams need to make sure that contracts are fit for purpose and allow for any unforeseen market conditions (such as the Covid-19 pandemic) which can cause changes in search volumes.

The current uncertainty in the market is exposing the weakness of fixed data contracts and commitments to search volumes. As a result, risk and procurement teams will need to conduct regular reviews of data contracts on an ongoing basis. 

Key considerations when negotiating bureau data contracts:

Asking the above questions and understanding exactly how to negotiate on the best contract for your organisation will help with cost savings and overall growth. However, there are also other key considerations to take into account:

●      What flexibility on usage can be written into the contract such as carry forward?

●      Is it worth focusing on total spend rather than minimum spends per product ?

●      Can you request single unit pricing on total spend as opposed to tiered pricing?

●      Can you ask for a blended price to include all data sets required compared to individual search pricing?

When negotiating contracts, and with the right information and benchmarks in hand, we recommend that you stand your ground and, where necessary, escalate to senior leadership. It’s important to ensure that there is alignment within your organisation between senior management, credit risk and procurement teams to ensure the best data is secured at the best pricing. 

Why is it important to secure flexible contracts?

Changes to the way consumers saved and spent money throughout the Covid-19 pandemic mean that some traditional risk models are no longer effective. With a reduction in searches and new account openings, forecasting and signing up for a usual length of term can be challenging for organisations. 

Without flexibility in contracts, you may find your organisation committing to higher volumes to benefit from discounts or have to pay unnecessarily high pricing for lower volume commitments.

That’s why an overview of the options available and information on what others in the industry are paying for the same products, gives credit risk and procurement teams the power to negotiate and ensure that the bureau provides the same flexibility. This is a key element of future proofing an organisation’s strategy and helps to save on costs and prevent being locked in to a contract.