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The financial services sector has continued to change rapidly in recent years. Operators have had to adapt quickly to policy changes and mounting competition from external parties to remain operable, resulting in structural changes across several markets. These changes have had mixed results for procurement professionals.

Interest Rates

  • Since December 2015, the Federal Reserve has been raising the federal funds rate incrementally
  • Interest rates are currently at the highest level since the recession began roughly a decade ago
  • The Federal Reserve has indicated it will continue to raise rates slowly over the next few years
  • The cost of borrowing capital rises as the federal funds rate increases, hurting borrowers

Key Takeaway: Lenders adjust rates on loans and credit cards in response to changes in the federal funds rate. Therefore, buyers should lock in lower fixed-rate loans before the federal funds rate climbs further over the next few years. Moreover, buyers with existing adjustable-rate loans can pay down their balances now to avoid higher interest expenses in the future.

External Competition

  • Banks have recently faced greater competitive pressure from financial technology (fintech) firms
  • Artificial intelligence, big data and blockchain technology are among the biggest disruptors
  • Fintech firms have been flooding markets like payment processing, boosting competition among providers
  • Peer-to-peer lending platforms have emerged as viable alternatives to traditional bank lenders

Key Takeaway: The proliferation of fintech has altered the competitive landscape in several markets, whereby traditional financial services providers have had to compete more intensely for market share. Buyers should leverage competition between operators, especially among smaller providers fighting for market share, to achieve favorable contract terms and pricing.


During the next three years, ProcurementIQ projects that average prices for financial services are projected to continue climbing. For example, the Federal Reserve has outlined a plan to continue raising the federal funds rate, with the goal of reaching a 3.0% interest rate during the next few years. As the Federal Reserve targets higher interest rates, banks will raise interest rates on loans and credit cards. Therefore, buyers should lock in lower rates sooner than later to receive the best possible deal.

Meanwhile, financial services providers will receive some relief from policy changes. President Trump recently signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act, which deregulates the banking industry by amending key provisions of the 2010 Dodd-Frank Act. The law aims to eliminate regulatory hurdles and compliance costs for small banks and credit unions, boosting their profitability. Overall, providers’ high and rising profit margins will give them additional room to negotiate on service rates without fear of hurting their ability to operate. Buyers should capitalize on this fact, along with mounting competition between providers, to better their leverage in negotiations.

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