Beyond price: How to optimise credit data contracts

When it comes to credit data contracts, negotiating price is just one element. Aspects like contract flexibility, technological adaptability, and capped RPI strategies can dramatically influence your competitive edge and operational efficiencies.

Unfortunately, there’s a catch. Understanding the options available to you remains opaque. The good news? It doesn’t need to be that way. 

In this blog, we’ll delve into the key elements of a robust credit data agreement—and offer a checklist to help you negotiate better.

The importance of data contract flexibility

Flexibility embedded in data contracts isn't a “nice to have”—it should be a given for every lender. Why? Because the rapidly changing economic landscape demands contracts that can pivot and adapt to evolving needs. 

To help you understand what we mean by ‘data contract flexibility’, here are three considerations we help to embed in credit data contracts:

1. Carry forward of unused spend

When you carry forward unused spend you’ll gain even greater efficiency, especially when demand fluctuates. It reduces waste by allowing unused portions of the contract to be utilised later, addressing the challenges of volume forecasting (which can be difficult).

2. Lower minimum spends and graduated pricing

Instead of fixed-term, high-commitment contracts, flexible pricing structures based on actual usage can lead to significant cost savings. This approach aligns costs with real demand, ensuring that financial commitments are scalable and future-proof. 

3. Capped RPI increases

You don’t have to accept your provider's RPI increases. Controlling cost increases through capped Retail Price Index (RPI) adjustments helps manage budgeting more effectively and avoids unexpected cost escalations. 

💡To sum up, flexibility in credit data contracts plays a key role in aligning financial strategies with the dynamic nature of the economic market. Key features like carrying forward unused spend, adopting graduated pricing models, and capping RPI increases are not just tools for cost management; they are strategic enablers.

In other words, they provide much-needed agility to financial institutions, allowing them to respond to market fluctuations effectively and efficiently.

Creating an integrated ecosystem

While flexibility is a critical aspect of your data contract, there are other considerations to think about too. Like making sure your credit data ecosystem works in harmony. It starts with the right systems.

Here are 7 ideas to consider:

1. Choose cloud-based decision platforms

We recommend cloud-based systems because they enhance scalability and accessibility. Plus, they allow for rapid deployment and adaptation to changing needs. (Something every lender needs right now.)

2. Ensure your platform is data-agnostic

Make sure your systems can easily integrate new data sources to fill data gaps—and potentially reduce costs, as providers know that switching or adding data sources is not prohibitive for customers.

3. Solutions to bureau “lock-in” and multiple data feeds

Address lock-in issues and enable the use of multiple data feeds to optimise data coverage and usage in customer journeys. This flexibility is key in a rapidly changing data environment.

4. Combining multiple CRA data into a single customer profile

We’ve briefly touched on this one, but systems that can consolidate data from different CRAs into one comprehensive profile are invaluable. They cover data gaps and use the best available consumer data.

5. Make sure you have high uptime with instant failover

Another key consideration is high uptime. Reliability and robust failover mechanisms ensure continuous operation, a critical aspect for financial institutions.

6. Ease of use and no-code capabilities

User-friendly interfaces and no-code options reduce reliance on technical staff and lower operational costs. Some platforms will offer innovative features like drag and drop to make this super simple.

7. Combining systems at no extra cost

Finally, you’ll want to make sure you can use multiple products across all the different internal divisions and channels at no extra cost. 

In short, by addressing key aspects like bureau lock-in and offering user-friendly, cost-effective systems, financial institutions can significantly improve their operational efficiency and data management capabilities.

Implications of overlooking key elements in data contracts

Ignoring crucial elements in credit data negotiations can lead to significant financial repercussions. Here's a breakdown of how overlooking each aspect can impact financial institutions: 

●      ❌Cost inefficiency: Without the ability to carry forward unused spend or benefit from graduated pricing, institutions may incur unnecessary expenses. This inefficiency can strain budgets and reduce financial flexibility.

●      ❌Forecasting challenges: Rigid contracts that don't account for fluctuating demands can lead to either underutilisation or overspending, complicating financial planning and forecasting.

●      ❌Competitive disadvantage: Failing to leverage cloud-based, data-agnostic systems can put institutions at a competitive disadvantage. The inability to rapidly adapt to market changes or integrate new data sources can hinder responsiveness and innovation.

●      ❌Increased acquisition costs: Inefficient systems can lead to higher operational costs and, consequently, higher customer acquisition costs. This can affect market positioning and the ability to attract new customers.

●      ❌Fraud risks: Systems lacking advanced fraud and financial crime prevention solutions may expose institutions to higher fraud risks, potentially leading to financial losses and reputational damage.

●      ❌Brand degradation: Poor system performance compared to peers can lead to brand degradation, affecting customer trust and loyalty.

●      ❌Missed opportunities for innovation and growth: Financial institutions may miss out on opportunities for innovation, leading to stagnation in a rapidly evolving market.

●      ❌Lack of tailored solutions: A set and forget approach can result in generic solutions that may not fully meet the specific needs of the institution, reducing the effectiveness of credit data utilisation.

👉In summary, overlooking these key elements in credit data contracts can lead to financial inefficiencies, reduced competitiveness, higher risks, and missed opportunities for growth and innovation.

Bottom line: It's crucial for institutions to consider these aspects comprehensively to maintain a strong market position and ensure financial stability. But don’t worry, we have a quick checklist to guide your decisions.👇

[Checklist] Key criteria for credit data contracts

When negotiating credit data contracts, it's crucial to look beyond the price and consider the entire value proposition. If you want to secure agreements that align with strategic goals and operational needs, here are just a few suggestions:

✅Evaluate data quality and integrity: Check the accuracy, timeliness, and completeness of the data. Use data benchmarks to assess all these and more.

✅Assess technology integration: Ensure new data sources can be easily integrated into your current systems. And look for support in the contract for future technological advancements.

✅Verify regulatory compliance: Confirm that the data provider can adapt to regulatory shifts, thus safeguarding your institution from compliance risks. 

✅Consider service and support: Evaluate the provider’s reputation for customer service. Reliable support can greatly reduce operational bottlenecks. 

✅Look for innovation potential: Choose contracts that offer flexibility for innovation, enabling your institution to adapt and progress with market changes.

✅Recognise strategic partnership value: Understand the benefits of a vendor that acts as a strategic partner, offering insights and assistance in navigating the changing credit landscape.

✅Assess contract flexibility: Look for features like carry forward of unused spend and graduated pricing that adapt to your actual usage.

✅Evaluate system efficiency: Consider cloud-based, data-agnostic decision platforms that enhance adaptability and reduce costs.

✅Check for fraud prevention solutions: Ensure that the provider offers cutting-edge solutions to mitigate financial crime risks.

Side note: The goal is to find a partner that delivers long-term benefits, not just immediate cost savings. This approach ensures that your institution secures a competitive advantage and remains agile in a dynamic financial environment. 

Your holistic approach to credit data contracts

There’s a lot to consider when negotiating credit data contracts. Instead of zeroing in on just price, strategically plan the credit data ecosystem, including flexibility, systems, RPI caps, vendor lock-ins, and more. 

These elements are crucial in shaping contracts that not only meet immediate pricing concerns but also align with broader business objectives and market dynamics. By focusing on the entire ecosystem, financial institutions can ensure they are well-positioned to adapt, innovate, and grow in an ever-changing financial landscape.

Remember, the right credit data contract is about value beyond cost. It's about securing a strategic advantage that will sustain and propel your institution forward.