How financial services procurement can gain better leverage with credit data providers

Over the last few years, financial services businesses have grown to rely on procurement to support and strengthen supplier relationships. That’s especially true during the pandemic.

According to one study, 52% of enterprises viewed procurement’s impact during the pandemic as either “game-changing” or “significant”.

Today, the majority of procurement departments are well-positioned to reevaluate existing supplier relationships, identify opportunities for savings, and put a plan of action in place. Strategies like reducing supplier costs, as you know, can provide valuable liquidity.

Financial Services procurement priorities 2022

The past year has underlined the point that the procurement function is critical to both efficiency and effectiveness.

According to Ardent Partners 2021 CPO Report, the top procurement priorities for 2021 included the need to find more savings, using Big Data, and improving efficiencies and effectiveness. If procurement’s future points towards intelligence, efficiencies, and innovation it’s vital that procurement is recognised as creating actual business value.

More transparency around product pricing, for example, provides procurement teams with better visibility to help credit risk teams make informed decisions on where cost-reductions can be made. This visibility allows them to identify opportunities and deliver efficiencies that provide long-term savings and directly impact the bottom line of the business.

How procurement teams can develop a more nuanced and strategic approach to facilitate supplier negotiations.

There are many opportunities to create value. To capitalise on them, it’s worth drawing upon a wide range of data, tools, and expertise.

At the beginning of the COVID-19 pandemic, procurement teams had to switch to crisis management in order to alleviate disruption. Today, procurement teams now have the opportunity to help their organisation recover from the pandemic, as well as lead the way in the way they function and the value offered to businesses. 

To do this, procurement teams can start with reviewing the overall value provided by a vendor relationship and how it can maximise this relationship. Building meaningful partnerships promotes collaboration, accountability and innovation which allows procurement teams to help reduce costs whilst improving the efficiency and reliability of the supply chain.

To help businesses create the best buyer-vendor relationships, procurement teams can leverage these tactics:

Cut business costs

All businesses are looking to cut costs without damaging overall profitability. Effective cost management is a crucial part of purchasing and handling supply chain management. By collating and analysing information to present the business with suggested suppliers and prices, procurement teams help to reduce ongoing costs and operational risks.

Drive innovation

Not only can procurement teams look to reduce business costs, they can also suggest suppliers that can add value and drive innovation to make the business more competitive.

Support credit risk teams

In credit risk in particular, as well as cost savings, procurement can ensure credit risk teams have the best data available for affordability assessments. For example, credit bureaux are just now starting to include BNPL data into risk engines. This data is adding a whole new level of insight to protect credit providers and consumers.  

Beyond strategic capabilities, procurement’s ability to use valuable insights to make better decisions and drive greater value continues to expand. Linking data intelligence to important decisions is where value creation can come together.

Using data and insight to become more agile and intelligent

Procurement teams, especially within financial services, have seen an accelerating shift towards becoming more data-driven, more intelligent (e.g., more informed by data and evidence and less by ‘gut feel’), and as a result more agile.

The right blend of expertise, efficient processes, and enabling data and technology is needed for procurement to deliver full enterprise value.

Final recommendations

In 2022, many procurement teams will be asked to deliver sizeable results in the face of both new and ongoing challenges caused by the financial services landscape.

Data-driven intelligence is no longer an aspiration like it was only last year - it is a necessity in today’s competitive landscape. Procurement departments, their operations, systems, and the way in which they transform knowledge into strategies, must keep pace with their rivals.

Rich insight drawn from clear and transparent sources is much more likely to succeed than other methods.

We recommend the following strategies and approaches for procurement departments seeking to improve their performance:

●      Use all the available data and insight: accurate and detailed insight into data pricing, quality, and accuracy provides better opportunities to drive business growth and cost savings.

●      Increase visibility: Insight into supplier prices is a challenge, but there is expertise to help.

●      Be proactive: review contracts mid-term as well as end of term. Now is the time to determine if existing providers make sense or if there is a better approach.

●      Revamp and rethink your contracts: Market events create inefficiencies such as search under-usage. Have the length and duration of your contracts exposed you to any unnecessary spend?

●      Reexamine, and where possible, reimagine suppliers: Most procurement leaders inherited their current supply chain. The pandemic has provided ample reason to examine the why, what, how and with whom businesses trade.

●      Empower your team: Keep your team informed by partnering with dedicated experts who can provide incredibly useful insights on data pricing, quality, and accuracy.

Procurement doesn’t need to completely transform the way it works to help businesses find the right credit data suppliers, at the right costs.

The focus should be on providing procurement with the knowledge and expertise needed to be valuable to credit risk and operations. Moreover, credit risk teams should also be provided with knowledge so they’re able to work alongside procurement and provide better value for the business as a whole.