Emerging trends in financial services procurement

With rising costs and growing data needs, financial services procurement teams are under intense pressure to optimise spend and make strategic decisions. This calls for a new approach - one grounded in data.

Data benchmarking provides the visibility procurement teams need to drive real change. By comparing your data pricing, quality, and accuracy against industry standards, benchmarking reveals opportunities to improve value, align with broader business goals, and gain a competitive edge.

In this post, we'll explore the evolving world of financial services procurement and demonstrate how data benchmarking is simplifying complexity and empowering teams. 

You'll discover how benchmarking helps you:

• Cut costs by renegotiating contracts armed with insights
• Enhance data quality by identifying provider gaps
• Make data-driven decisions for strategic spend
• Gain leverage based on industry pricing knowledge
• Turn procurement from a cost centre into an asset

Whether you're a credit risk team, procurement specialist, or finance leader, read on to learn how to transform the way you buy data and drive real impact. 

The rising complexity of financial services procurement

But first, it’s important to note that financial services procurement has never been more complex. Lenders today face challenges that make effective and strategic procurement extremely difficult:

1. Proliferation of vendors and partnerships: The fintech revolution has exploded the number of vendors offering new services and solutions. While more choice seems better, managing multiple vendor relationships strains procurement resources.

2. Exponential increase in data and technology: From AI to blockchain, new technologies are transforming financial services. The sheer volume of data and tech solutions to evaluate is overwhelming procurement teams.

3. Alignment with broader business goals: Procurement can no longer operate in a vacuum. Teams need to support overarching growth, customer experience, and digitisation goals across the organisation.

4. Rising costs and tighter margins: Increasing budget pressures force procurement to optimise spend and constantly validate value from vendors and partners.

The bottom line: This new level of complexity impedes procurement's ability to make smart, strategic decisions about providers, services, and solutions. That’s why teams need better visibility into spend, performance, and industry benchmarks in order to manage complexity. Rather than be paralysed by it.

Aside from these points, another critical aspect lenders must contend with is regulation. 

Let’s look at this in a bit more detail next. 

Navigating the regulatory environment

While regulation aims to protect consumers and foster healthy competition, new regulations like the FCA's Consumer Duty can create short-term cost burdens for financial services providers. 

Requirements such as expanded data sharing and more robust affordability checks add layers of complexity to procurement. Providers must now budget for new Bureau products and services to enable compliance, on top of existing inflated costs.

Unfortunately, Bureau providers are not offering discounts to offset these regulatory expenses. Instead, they are taking advantage of the new requirements to upsell additional features and functionality. With wide interpretation around meeting “Consumer Duty,” Bureau providers pitch products aggressively.

This adds insult to injury for providers already overpaying for Bureau services. The discounts providers should be getting from benchmarking could help offset the investments required for regulatory compliance.

Financial services procurement finds itself stuck between a rock and a hard place. While increased regulation aims to ultimately improve competition, data sharing, and consumer protection, it is also being leveraged to charge higher prices in the short term.

The good news: Through data benchmarking, procurement teams can gain the insights needed to navigate this tension. Comparing Bureau pricing and services to industry standards helps reveal where providers are being overcharged. Armed with this knowledge, teams can negotiate better contracts and allocate resources to build long-term regulatory capabilities.

So how can procurement teams overcome all this? Let’s look at three key trends. 

Overcoming procurement complexity: 3 key trends  

Trend 1: Data-driven procurement 

As we transition into an era where data reigns supreme, the practice of relying solely on personal experience or instinct is gradually being phased out. Instead, a new approach, data benchmarking, is taking centre stage, particularly in financial services procurement.

It's simple: data benchmarking provides you with a reliable, objective set of data points against which to measure your procurement performance. This comparison offers valuable insights that can guide your procurement strategy and decision-making process.

For instance, you can benchmark your organisation's cost-saving efforts against those of industry leaders to identify gaps in your strategy. You can also use data benchmarking to measure supplier performance, making it easier to choose the right suppliers for your business.

By adopting this trend, your organisation can stand out in the competitive financial services market and achieve remarkable procurement success. 

Trend 2: Greater transparency 

Transparency and compliance are two sides of the same coin in the world of procurement. Both are vital for building trust with stakeholders, meeting regulatory requirements, and maintaining a competitive edge in the financial services sector.

In the context of procurement, transparency means that all procurement activities, from sourcing to supplier evaluation, are open and accessible. It involves clearly documenting and communicating procurement processes, decisions, and outcomes. Transparency is where data benchmarking shines. By adopting data benchmarking, organisations can provide clear, tangible evidence to back their procurement decisions. 

For instance, if stakeholders question why a certain supplier was chosen over others, benchmarking data can show how the chosen supplier outperformed the others based on various performance metrics.

Trend 3: Sustainable procurement

Sustainability has moved from a 'nice-to-have' to a 'must-have' in today's business world, and the financial services sector is no exception. Increasingly, organisations are expected to demonstrate their commitment to environmental, social, and governance (ESG) goals—not only in their core operations but also in their procurement practices.

Sustainable procurement is the practice of integrating sustainability principles into procurement decisions. It involves considering not just the price and quality of goods and services, but also their environmental and social impacts. The goal is to promote positive environmental, social, and economic outcomes at every stage of the supply chain.

So, how can data benchmarking support sustainable procurement? You can benchmark your current performance against past performance or industry standards to measure how far you've come and where you need to improve.

Of course, adopting sustainable procurement requires a commitment to sustainability at all levels of the organisation. It also requires investment in tools and systems that can collect, analyse, and report sustainability-related data.

By integrating data benchmarking into sustainable procurement practices, financial service providers can make a meaningful contribution to sustainability, enhance their reputation, and meet the growing demand for responsible business practices. 

Striking the right balance

Trends like data-backed procurement, enhanced transparency, and sustainability are changing the way we think about and approach procurement. Underpinning these developments is the powerful tool of data benchmarking, offering a robust, objective basis for procurement decision making.

By embracing these trends and integrating data benchmarking into your procurement practices, you can drive cost savings, improve efficiency, enhance transparency and compliance, and promote sustainability in your operations.