How procurement can drive innovation and efficiencies in financial services

The financial services sector is going through extraordinary levels of transformation. These external pressures are forcing financial institutions to focus hard on their credit data suppliers, seeking to marry innovation with quality and cost savings.

Procurement can have a significant impact in the Financial Services sector, not just in terms of profitability, but in terms of efficiency and assurance as well. And the potential of procurement teams not just in cost-cutting but in driving transformation are beginning to be realised.

In this article, we look at how procurement can transition to more forward-looking initiatives and become an important driver of innovation and growth.

Transitioning to forward-looking procurement

For forward-planning, procurement often focuses on how costs could have been optimised, but we’re seeing an interesting transition taking place as procurement teams begin to look forward and drive efficiencies and effectiveness.

Most recently, credit risk teams have been leaning on procurement to address pricing transparency challenges from the credit bureaux and other suppliers. Rather than credit risk teams handling data contracts, procurement can better coordinate efficiencies through better insight and transparency on pricing.

This more collaborative approach to sourcing the best suppliers and pricing has also seen firms review existing contracts due to lack of usage, and gain better prices in a way that makes their business truly cost-effective while ensuring the right quality data is used.

Procurement leading the way for innovation

When it comes to innovation, procurement functions can often be overlooked. However, with a holistic view of the supplier base it should not be ignored as a means to drive business development and growth.

The Financial Services sector has long been critiqued for being slow to adapt technologically and for a heavy reliance on revenue growth and tax margins. Simply focusing on these aspects means that risk management, cost savings and efficiencies that an effective procurement team can offer, can be overlooked. In fact, procurement teams that can offer these benefits lead the way in terms of innovation.

As the effects of the COVID-19 pandemic start to ease, credit providers want contracts with more flexibility to allow them to fill gaps in credit data and ensure that they are not paying more than competitors for the same products. To become more innovative, procurement focused on credit risk are starting to look for flexible contracts and partner with credit bureaus that offer transparency and the best price to ensure the best data is available for affordability assessments, making sure they are competitive in the market.

To drive efficiency, credit risk focused procurement teams are moving away from just cost-cutting and are focusing on the suppliers that will bring value to the organisation to drive innovation and change, rather than using the same supplier year-after-year or relying on existing relationships.

Using knowledge of negotiating contracts, building relationships and managing ongoing supplier performance to identify and assess potential credit data suppliers, procurement teams have the capabilities to work alongside credit risk teams to focus on finding and comparing suppliers, products and processes that will bring value to the organisation.

What’s more, credit providers who utilise procurement tend to find flexibility in contracts to fill gaps in credit data and compare pricing to ensure they are not paying more than competitors for the same products are leading the way. Put simply, this is because procurement teams have the opportunity to provide the information credit risk teams need to identify and assess potential suppliers, and compare providers to find the best outcome for the organisation.

Working alongside suppliers

Organisations that utilise their procurement functions at an advanced level are aware that focusing on the price of products and services severely limits the value added. By working alongside suppliers and cooperating with each other, value can often be unlocked for both buyers and suppliers.

In credit risk, by comparing costs and negotiating with data providers, the providers benefit from longer, ongoing relationships and credit providers are able to utilise data with the best coverage and accuracy.

In summary

As a result of the changes in innovation and efficiency, the power of procurement is being realised across all parts of the business. Procurement is changing from a background function to something that can be used to support the performance of credit risk teams who are looking for better ways to compare and purchase from an organisation’s suppliers.

Organisations will continue to rely on procurement functions to recover from the current crises. However, by reimagining what the function does, how it operates and the capabilities it will need, organisations will lead the way in innovation from procurement teams and add more value to their business and customers.

As financial institutions look ahead to growth this year, we expect procurement to increasingly come to the fore as a driver of innovation and business growth.