Fintech
How to end a relationship with a fintech provider and protect your data
It’s often easier to start a relationship than to end one.
The same goes for vendor relationships where consultancies may have several to dozens of partners, whether they operate on a third-party platform or use a single tool from a software vendor. But with the entry of more advanced technologies, such as artificial intelligence, there are also more suppliers to choose from, creating a greater likelihood that a company may end a relationship with a supplier.
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This is especially more common when tech companies get bought, meaning that existing contracts pass to new ownership. This can create difficult situations, especially when data changes hands.
“We had a case with a vendor where we tried for almost nine months to work on a project that wasn’t going very well,” said Brian Carter, vice president of technology at Axtella, a financial network of two broker-dealers and an RIA . “They had new management. They had new priorities. They had a lot of turnover. And we had more conversations with them.”
Carter, who recalled ending the relationship with the vendor in early 2023, said one of the biggest lessons learned was how to manage communication, especially when it came to managing data between the parties.
“We worked a lot on language because it’s easy to write in a negative tone, especially when you’re frustrated about something,” she said. “If our letter had had an unpleasant tone, perhaps we would have had more trouble getting our data. We tried to break off the relationship to such an extent that we were both left with an open door.”
Getting to a common conclusion, however, took months of meeting with the vendor, sending updates on missed deadlines, and offering extensions.
“It’s almost like ending a marriage in a way where you had a certain level of commitment. And in the beginning you try to make it work. You don’t end a relationship lightly,” he said.
But to end a relationship with a supplier, Carter and others say companies need to go back to the beginning: the contract terms.
Data sharing, cybersecurity and always a way out
“The first thing to pay attention to is who owns the data,” said John O’Connell, founder and CEO of The Oasis Group, a provider of software for wealth managers and financial technology companies based in Monroe Township, New Jersey. “The second is: Can I get my data from this provider when I want it?… If it’s not in the contract, you want to negotiate it into the contract so you can get your data back.”
Depending on the type of provider, there are some that will store data and may deny or charge a company if they request to extract their data. Some providers also store data in a cloud, which may allow other parties to access it. And then there are CRM platform providers like Practifi that do not hold, retain or have access to the data without the customer allowing access.
“In tech contracts, often the question people ask is: How painful will the breakup be? How will I get my data if I want to leave you?…We explain to them that there’s a link in the contract where they can click that link and it will download the data for them,” Practifi CEO Adrian Johnstone said.
“They don’t need us in this process because it’s their data. We’ve given them that control,” he said. “It needs an explanation because there is skepticism that this could actually be the reality because they are so used to living in a world where there has to be a lot of legal terms and conditions on how to get their data.”
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This coincides with the next most critical factor companies look for in supplier contracts: cybersecurity.
In most cases, the consulting firm is often held liable for data breaches, regardless of whether they occurred through a vendor. Federal regulators have increased the responsibilities of companies, including asset managers and brokers, both in supervising vendors and reporting data breaches. In May, the U.S. Securities and Exchange Commission (SEC) changed a rule requiring some financial institutions to notify affected individuals within 30 days of a breach.
“There has been a growing expectation from the SEC about what [firms are] do to manage your vendors, to have assurances about any sharing of information about your clients,” said Mike Capelle, co-founder and co-CEO of Modern Wealth Management. “This really impacts vendor selection. …The vendor should be able to describe to you what their information security program is to give you some comfort that they are invested in this area and will protect any data you share with them. This is critical these days.”
This also leads to another point that several companies have highlighted as critical to a contract: having a way out.
O’Connell advised businesses to look at the cancellation clause and the timeframe for a business to notify the seller that it does not intend to renew when the term expires.
“A lot of companies have a one-year renewal. So if I have 60 days to tell you I don’t want to renew anymore — and if I don’t do it within those 60 days — I’ll be renewed for a full year and I can’t get out of that contract,” he said .
Cappelle also said they are looking to add a clause in the contract, such as a 90-day window from the start of the contract, that provides an exit if the relationship doesn’t meet expectations early on.
“We always try to be careful to do our due diligence, we’ve looked at different vendors, we think this is the right one for us. But we also try to be realistic in the sense that we’re not using it yet, and so we want to be prepared for the fact that things may not go as planned,” he said. “Because the worst thing you want to get into is like a five-year commitment to a provider that’s new to you, and then not see things go the way you expect.”
But Cappelle also acknowledged that it is neither common nor easy to negotiate contracts with suppliers, especially with larger companies that have standard contracts long accepted by the industry.
“If it’s a new company eager for new clients and business, they will tend to be much more flexible in negotiating deal terms. But established players who have a track record with lots of existing clients will be less likely to do so,” he said. “It’s always worth asking, but you just have to have real, realistic expectations.”