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Legacy vendors are more of an issue than legacy systems 

I often find myself in weird or frustrating situations that I don’t know how to break. For example, dealing with clients who require a Government Tax Residency Letter and multiple hurdles to be cleared before they can make payment; or dealing with American clients who want to pay me by cheque; or, worst of all, American clients who require lots of form filling thanks to Sarbanes-Oxley audit trails. Now these forms should be easy, but they can be cumbersome.  

For example, I recently spoke at the conference of a leading digital solutions provider. One of the top technology solutions companies worldwide. They hired me to inspire digital change amongst their fusty old bank clients. I expounded the wonders and beauty of digitalisation and left.  

Meantime, my assistant was invoicing them and was told that they would only accept an invoice in the post, even though we had sent our usual electronic version. The in-the-post request meant that my assistant just printed the copy we had sent them electronically – couldn’t they do that? – and put it in the post.  

A month later, we chased up for payment and the company said that they hadn’t received the invoice. Could we provide the tracking number? Unfortunately, we didn’t have one, so the whole process starts again a month later, with us printing a copy of the exact document they held electronically, and putting it in the post with tracking this time. 

From our side, we now have a large invoice outstanding for over a month, affecting our cashflow. From their corporate offices viewpoint, they never received an invoice. 

In another recent example, I had a client who wanted to pay me the easiest way: credit card. However, the link my assistant sent over couldn’t work. It may be because it was via PayPal and it couldn’t handle the amount being paid for some reason – they only tried it once – so the client reverted to asking if they could put a check/cheque in the post. 

At this point, it’s not ideal for either of us.  

For me, it means filling in W8 forms and stuff, getting a piece of paper in the mail – a cheque – that has to be taken to the bank, who will take a month to process it through the SWIFT network, and then they will charge me fees and then some on exchange rates … but hey, we’ll get there.  

For the client, it means they have to get the whole procurement department on board, set up new vendors, register all the details on their einvoicing system (that secretly relies on paper) and doing vendor due diligence and onboarding. 

But, if it’s a choice of pay by card that doesn’t work then it’s pay by check/cheque, as that’s the only alternative for the company. A technology company. A payments technology company. I’m guessing you get where I’m going with this. 

Anyways, my assistant sends off our standard W8 form – we have one on file – and it gets rejected as it’s too old and not signed this year. We print off a new one and I sign it. We email it to the client and it gets rejected as it’s not a PDF file. We do it again, I sign it again and package it off. This time it’s acceptable, but needs to be sent in the post to their Head Office before they can process payment. 

At this point, I’m flabbergasted to find that I’m working with a 21st century payments processing firm that leads in technology marketing and prowess, but whose internal processes require days of emailing to clarify what’s needed and then, get this: 

  • It’s to enable the client to put paper in post to client so that  
  • Client can put paper in post to supplier so that  
  • Supplier can paper in post to bank so that  
  • Bank can put messages through nostro to counterparty so that  
  • Counterparty can agree funds to be transferred so that  
  • Bank can place funds in suppliers account  

… which all takes about six weeks in total and costs $100s … and this is a leading 21st century payments technology firm?  

Now, I personally think that some of these processes are put in place to allow big businesses to avoid payments to suppliers. However, and even if it’s not, here’s my point. Leading technology firms are my clients. They fly me to exotic locations to put a rocket up the backside of their customers to digitalise. In the meantime, some of them are actually more of a dinosaur themselves than the banking clients they ask me to lecture to.  

This is why I often claim that banks’ issues with legacy systems is not actually the legacy systems, but the legacy vendors who provide those systems. Take note. 

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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