As the saying goes... if you're not making mistakes, you're probably not trying hard enough. That philosophy works in most businesses, but can you afford to blow a multi-year, multi-million dollar core, IT or fintech contract negotiation? ...even a little bit? Most bankers can strike a winning loan deal any day of the week because you own that domain, but when it comes to technology contracts, let's face it - you're outgunned. In this session, you'll learn about the most important negotiating strategies you'll need to follow to be successful presented by Aaron Silva of Paladin fs, one of the nation's top technology contract negotiation experts

1. PRESENTED BY
SAVING
BANKER DANIEL
Aaron Silva
1 0 N e g o ti a ti n g C o mma n d me n ts
You S houl d N ever B reak
APRIL 2022

2. 2
BANKER DANIEL
EXECUTIVEVICE PRESIDENT & CHIEF FINANCIAL OFFICER
IN VENDORS WE TRUST
FEDERAL CREDIT UNION
25-year career in
banking and finance
Smart, sophisticated,
confident in his
negotiating skills but
can be easily humbled
Oversees technology
vendor management,
procurement and
spend analysis
Saving
Banker Daniel
Star of Short Film
Director’s Cut
Behind the Scenes

3. 3
AARON SILVA
CEO OF PALADIN FS & THE GOLDEN CONTRACT
COALITION PROFESSIONAL NEGOTIATOR
Industry PREACHER for the
health and success of CFIs
Created Paladin Blue Book
2007-2009
Advise Wall Street on
fintech & legacy core
Membership launch June 2016
Group “Offensive” Negotiations vs.
Legacy & Fintech Suppliers
200+ Institution Member
Target $1B in Total Contract Value
Largest global IT contract negotiations
Legal firm
15 Years Paladin
10 Years OASYS

4. 4
THE PALADIN BLUE BOOK™
BETWEEN 2007 AND 2022
$518,818,094
RETURNED TO BANKERS
$1.57M
15 YEAR AVERAGE PER DEAL

5. 5
SAVING BANKER DANIEL
Introduce
Actual Situation
Reveal Negotiating
Commandment Broken
Situation Debrief
and Analysis
1 2 3
Audience Guessing, Questions & Answers Highly Encouraged

6. 6
SITUATION 1 OF 10
CORE CONTRACT RENEWAL REQUEST
18 months before expiration.
Banker Daniel opens an
informal negotiation with Fiserv.
Requests for a renewal quote.
Banker Daniel informs Fiserv
that FIS has also been asked
for a competitive bid.
Daniel secretly provides FIS
with a Fiserv invoice.
($$ blacked out of course)
Daniel suggests he will also
send an RFP to each vendor as
part of bank decision process.

7. Thou Shalt Not Show
Your Cards Too Quickly
COMMANDMENT BROKEN:
Redacted for Confidentiality
Please download full version

8. 8
DEBRIEF:
THOU SHALT NOT SHOW YOUR CARDS TOO QUICKLY
Fiserv and FIS see efficiency ratio is 75% and climbing.
Profits are flat = unlikely bank can afford a major
vendor change disruption.
No actual demos are scheduled or requested.
Vendors will know that Daniel is not serious to switch.
This is a simple shakedown of Fiserv.
55%
60%
65%
70%
75%
80%
Efficiency Ratio
Profits
Redacted for Confidentiality
Please download full version

9. 9
SITUATION 2 OF 10
SEARCHING FOR A NEW INTERNET BANKING PROVIDER
9 months left on current 5-year Internet Banking contract.
Application is obsolete, not innovative.
Begins demo process of fintech internet
banking and mobile solutions
Banker Daniel sends a NOTICE OF NON-AUTORENEWAL
to avoid 5-year extension trigger at 180 days.

10. COMMANDMENT BROKEN:
Thou Shalt Control
the Sands of Time
Redacted for Confidentiality
Please download full version

11. 11
DEBRIEF:
THOU SHALT COMMAND THE SANDS OF TIME
Non-auto renewal should have been eliminated 4 years ago.
API negotiations / programming can take many months
Conversion dates for most vendors can be 6-18 months away
9 months is NOT enough time to evaluate a new supplier and negotiate
new contract.
11
Redacted for Confidentiality
Please download full version

12. 12
Start a negotiation with
24-30 months remaining
Complete discussions with
18-24 months remaining
“sweet spot”
Never start with less than
18 months ”Red Zone”
Sweet Spot
Most
Good
Least
Early Bird Sweet Spot Red Zone
Months Remaining on Contract
Cost
Reduction
Opportunity
24
Months
18
Months
Sign in the
“Sweet Spot”
Switching leverage
erodes quickly in RED ZONE
Begin Research
24-30 Months
Get Started
Get it Done
Get Moving!
Call to Action
PALADIN BLUE BOOK PRO TIP

13. 13
SITUATION 3 OF 10
NEW FINTECH RELATIONSHIP
Banker Daniel decides to implement an
online account opening service
from a VC-backed fintech company.
Jack Henry 20/20
48 months remaining
on a 6-year deal.
Daniel sends the fintech master agreement
draft and price sheet to their general counsel
at Shapiro & Shaprio to negotiate.

14. Never Lay
with a Lawyer
COMMANDMENT BROKEN:
Redacted for Confidentiality
Please download full version

15. 15
DEBRIEF:
NEVER LAY WITH A LAWYER
15
Little market intelligence on competitive SLAs.
Lawyers have no market data or pricing.
Few have seen or written fintech agreements (they’re new).
MIA: Where is the API contract and enhanced SLA with Jack Henry?
MIA: You’ll need a separate SOW for the OAO implementation.
Lawyers are paid for process – not motivated by outcomes.
Redacted for
Confidentiality
Please download full
version

16. 16
PALADIN BLUE BOOK PRO TIP
Lawyers are excellent for
reviewing a final draft of
an agreement.
Limit their interaction
with vendor unless there
is a real legal issue
to be discussed.
Don’t lose control.
Vendor RMs can be
forced to escalate when
lawyers are involved.

17. 17
SITUATION 4 OF 10
UNSOLICITED EARLY RENEWAL
Jack Henry sends early renewal proposal to Banker Daniel.
$10,000 per month discount on a 48-month extension.
IF he signs by EOM (-$480,000).
Daniel smartly doubles the discount to $20,000 and counters.
Jack Henry agrees to $12,500 monthly flat discount in exchange for a
60-month extension.
Banker Daniel approves the compromise. Signs renewal.

18. COMMANDMENT BROKEN:
Never Negotiate
Against Oneself
Redacted for Confidentiality
Please download full version

19. 19
DEBRIEF:
NEVER NEGOTIATE AGAINST ONESELF
Responding with a price counter signals that
Daniel doesn't care as much about contract terms.
He’s an economic buyer only.
Credit Union was $32,000 over FMV on Day 1.
$1.17M left on table!
Agreeing to a monthly fixed discount is big mistake.
Demanding 2x the offered discount told Jack Henry that
Daniel is guessing. Likely negotiating blind.
19
Redacted for
Confidentiality
Please download
full version

20. 20
SITUATION 5 OF 10
BANK NEEDS A CUSTOM API
Banker Daniel needs an API
for his new fintech LOS
Needs access bank-owned
data on Fiserv Portico.
Fiserv quotes $480,000 for
the API + programming
+ plus $.003 per API ‘call’
made by the LOS application.
Daniel chokes. Fiserv agrees to program API
for $250,000 because they
can re-sell it to other banks.
Daniel agrees.

21. Thou Shalt Not Guess
On Contract Terms
COMMANDMENT BROKEN:
Redacted for Confidentiality
Please download full version

22. 22
DEBRIEF:
THOU SHALT NOT GUESS ON CONTRACT TERMS
22
Credit Union mistakenly gave
away software license
royalty opportunity.
Daniel agreed to pay $.003 for
each ‘API call’ but has no idea
how much that will cost short or
long term. Major obligation risk!
Paid Fiserv $250,000 for
development of a new API
that Fiserv will exclusively profit
from in future.

23. 23
COMMANDMENTS THAT BANKER DANIEL KNOWS
Ye Shall Not Negotiate
Without a Plan
Never go in unprepared, unarmed.
Contracts should follow YOUR innovation plans, not
the vendors’. Control the negotiation tempo from the
beginning and through to the end.
Remember
Thy Stakeholders &
Members
Always negotiate cynically.
Even if the services are GREAT…Vendors want to
sell you the worst possible deal at the highest
possible price. They want to take money off of your
bottom line and put it in their pocket.

24. 24
SITUATION 8 OF 10
MERGER OF EQUALS
Two $8B credit unions merge while using the same core vendor, different platform
Acquired CU receive a $16,000,000
contract termination demand from
vendor.
Surviving CU estimates
de-conversion, conversion and
integration expense to exceed $4.8
million over 2 years post merger.

25. Thou Shalt Not Allow aVendor to
Become a Silent Shareholder
COMMANDMENT BROKEN:
Redacted for Confidentiality
Please download full version

26. 26
DEBRIEF:
THOU SHALT NOT ALLOW A VENDOR TO BECOME
A SILENT SHAREHOLDER
Entire vendor relationship was restructured under a new master agreement.
$38M spend reduction over next 5 years!
Nearly all predatory termination, de-conversion, integration expense
was mitigated.
26

27. 27
PALADIN BLUE BOOK PRO TIP
COST OF SERVICE
WHEN CUs MERGE
PROFIT GROWTH
GAIN SHARING
A vendor’s cost of service lowers when
two of their clients merge into one.
There is little relationship to
the amount of your assets and their cost
of service.
When your CU buys another CU or bank
processed by a competitor, gain sharing is
possible.
All M&A scenarios should be pre-stipulated in
contract now.
Redacted for Confidentiality
Please download full version

28. 28
SITUATION 9 OF 10
CORE CONVERSION
Banker Daniel contacts Jack Henry and threatens to convert to Fiserv
unless they ‘sharpen their pencil’ at the upcoming renewal proposal.
$2.8B Bank has all services with JHA since 2002.
Spends $186,000 - $214,000 per month.
15 weeks later JHA offers virtually NO economic or contract
concessions in proposal.

29. The Prospect of a Hanging Doesn’t
Always Sober the Mind
COMMANDMENT BROKEN:

30. 30
DEBRIEF:
THE PROSPECT OF A HANGING DOESN’T ALWAYS SOBER THE MIND
Jack Henry predicts a bluff.
Disruption to staff (conversion, retraining) too great for a $2.8 Billion CU.
Systems too entrenched after 19 years.
Only 2% of CUs volunteer to switch core suppliers in any given year.
30
Redacted for
Confidentiality
Please download full
version

31. 31
SITUATION #10
MERCHANT CARD SERVICES
31
Referral portfolio of 1,600
merchant accounts
Revenue share 25% with
processor (FirstData)
DDA Penetration > 6% of all
business customers
Monthly attrition 2%. - 3%.
(industry average = 1%)
$25 per new merchant
account opening bonus

32. COMMANDMENT BROKEN:
Thou Shall Follow the
Paladin Blue Book

33. 33
DEBRIEF
THOU SHALL FOLLOW THE PALADIN BLUE BOOK
Increased DDA penetration to 20% (and climbing +5%)
Restructured revenue share agreement – revenue increased $1.2M per year
Attrition reduced to sub 1%
Converted merchant services portfolio into $2.5M asset.
Repaired all contract defects.

34. 34
PALADIN BLUE
BOOK PRO TIP
Merchant services probably least
understood product offering sold by CUs.
Proactively prepare payment processing
agreements for fintech evolution.
Everything is moving to payments
”It is where the action is!”

35. 35
WHICH COMMANDMENTS AREYOU BREAKING?
Access to Director’s Cut
SAVING BANKER DANIEL
Download the Presentation
Which Commandments AreYou Breaking?
FREE Contract and Pricing Assessment vs.
Paladin Blue Book

36. THANK
YOU
Aaron Silva
877-746-4859 x 704
asilva@paladin-fs.com
asilva@goldencontract.com