September 20, 2021
By Catherine York Powers
Financial institutions across the globe have seen far-reaching advances in technology over recent years. From newer fintechs emerging with new technologies to established institutions looking to improve efficiency, it’s clear that technology has the power to give a competitive edge. Traditionally, financial institutions choose a specific path to adopt and deploy new technology projects: build, buy, or partner. This decision is critical before securing funds and allocating resources internally.
So how can financial institutions best decide which path to take, or whether they should consider a hybrid model instead?
In this guide, we’ll share seven quick considerations every financial institution should take into account when deciding to build, buy, or partner.
The Seven Considerations
1. Set measurable goals. What do you want the new tech to achieve or improve? Your goal should be time-bound and clearly defined with a precise way to measure your progress. Don’t get caught up in the latest technology buzzwords or digital distractions. Do you want to:
- Drive down costs?
- Increase efficiency?
- Improve customer retention or engagement?
- Upsell or cross-sell?
Be sure to look beyond initial-use cases, to increase ROI and scale. The Seven Considerations
2. Small steps can have a big impact if the customer is the focus. It may be tempting to take a huge leap toward your goals by, for example, spending your entire budget on a new suite of technology tools. However, taking small steps toward your goal with a customer-centric focus is a good way to get started, especially since customers are demanding more from financial institutions after other industries such as retail have raised the bar for digital, seamless experiences. Here are a few goals to consider:
Engage on an individual basis. Taking the loan servicing experience, for example, try to adopt out-of-the-box, borrower-facing solutions that hyper-personalize in order to maintain a personal touch and that offer self-service resolution options—without requiring a change out of your core platform. This powerful combination helps you get more intelligent with your customers’ needs and engage with multi-tasking ones who are increasingly looking for a faster turnaround. Implement smart automation. Digital tools built into the borrower loan portal that identify new products your customers may need—displayed at optimal times—can improve conversion rates and drive revenue. Look for solutions that go beyond an intake form for tasks that end up in long fulfillment queues and tie up your employees. More and more solutions are automating even the most complex, manual processes end-to-end. Be flexible. Regardless of your desired features, adopt a cloud-based or cloud-native platform and a progressive tech stack that allows you to add features flexibly.
3. Break down silos. Savvy financial leaders recognize the importance of breaking down silos in order to foster collaboration amongst their employees. However, breaking down silos also creates the opportunity to integrate powerful technological solutions. For example, loan origination, loan servicing, and marketing all traditionally operate as independent verticals, despite the similarities in data and the desire to drive consistent messaging across the verticals. These departments can benefit from shared technology and features to create better leverage and ROI with broader application of the implemented platform.
4. Set your budget and understand the real costs of “build versus partner.” Due to competing priorities for tech resources, internal builds are often delayed and thus go over budget. With core integrations or system replacements falling in the ballpark of $5-10MM (conservatively), financial institutions need to carefully consider how many internal employees or outsourced workers the project will require as well as the time to value. Once institutions make it through regression testing, data governance impacts, and operational changes from system overhauls, they can typically expect to see a return on their investment in 18 to 24 months after the implementation.
To avoid these delayed returns and accelerate customer experience priorities, fintech-FI partnerships can help FIs achieve key milestones by encouraging a ‘partner while you build’ strategy. The investment cost is typically one third of the build, and institutions can expect to see value within 3-6 months for cloud native applications that integrate with their core platforms. A partner while you build strategy also puts less strain on resources, allowing you to shift the work to experts with minimal internal hands-on-keys work for access and credentials. From there on, it’s training and setting up parameters for agile systems built to let you drive.
5. The impact and implications of automation and digital file transfer. Financial institutions looking to maintain their footing in today’s competitive landscape are all considering automated file transfers. This refers to the process of moving files, both internally and between partners or customers. Many financial institutions still have unreliable manual processes or legacy scripts, and by switching to digital file transfers, they can reduce error rates and overhead expenses, all while increasing efficiency.
However, there are serious implications of implementing a digital file transfer solution incorrectly or inefficiently, which is why financial institutions should have a solid understanding of the cost and time differences between building and partnering. Will your digital solution be able to increase security and remain compliant? What disaster recovery options are available and how much faster will files get transferred?
6. Increase compliance and security. Increasing demands for compliance and security are one of the major reasons why financial institutions prefer partnerships. With the Consumer Financial Protection Bureau actively enforcing compliance and requiring institutions to monitor and respond to any complaint filed against the institution or their subsidiaries, affiliates, and third parties, organizations need more visibility into their IT infrastructures. Partners can provide financial institutions with the solutions they need in order to continuously assess their security and compliance risk, without adding more employees to the payroll.
7. Decide which buying profile matches your goals, budget, scope, and speed to market.
Most FIs will fall into one of these four buying profiles:
- Best-In-Class: These organizations are killing it with the perfect combination of self-built and partnered technology. Less than 1% of FIs fall into this category.
- Bridge-the-Gap: These organizations are likely still holding onto antiquated legacy systems and need to innovate in order to keep up with the competition and rapidly changing market.
- Speed-to-market: These organizations have the initiative to build in the next 24 months but need to leverage quick partners in order to bridge the technology gap. Shameless Plug: Keep or discard any element of Constant’s technology at any time. Partner now while your team is building internally, then decide if parts of the partnership make sense long term or just for now.
- From-JV-to-Varsity: These organizations have served customers “just fine” for a long time, but they know it’s time to modernize and simplify. They may worry about the challenging lift or feel intimidated by the change management a new software will create for their already-slim teams. Second shameless plug: Onboard in under 20 days with as little as 6 hours from your internal resources to get your entire environment ready for training. A partner like Constant is fast, affordable, and dynamic to help your team take it to the next level—with ease.
Key Benefits of ‘Partner While You Build’ Strategy
Most innovation journeys begin with a trusted partnership with experts in your field. Technology partners must be simple and complex all at the same time. Streamlined user interfaces make building a solution seem more practical with a lower lift, while the complexity of a well-designed system lies in the back end with the ability to configure multiple scenarios and adjust without complex code changes.
Your new partner should be able to solve your targeted problem and deliver strong subject matter expertise, a focus on compliant solutions, a technology roadmap that you can grow with, and a solid understanding of your customers’ journey to leverage self-service offerings. And most importantly, they should help you become more resilient so that you can pivot quickly regardless of market conditions which in today’s environment still remain uncertain.
So what are some key benefits you can unlock with a ‘partner while you build’ strategy?
- Speed to market. Get relevant features delivered on time, before a market shift makes them irrelevant or less of a priority. Partners implement quickly with very little overhead, leveraging an a-la-carte or widget-based approach that allows you to turn on what you need, as you need it, and turn it off when you don’t.
- Cost. Partner solutions that integrate to existing infrastructure average out to be ⅓ of the cost of an internal build and reduce costly delays.
- Scope. Partner solutions deliver on features without scope-creep or refinement to meet milestones or budget constraints. Think: design, partner build/deliver, and shift to the next item. It becomes cyclical to deliver a minimum viable product (MVP) and then innovate.
Meet BotDoc & Constant
BotDoc and Constant are industry experts building software to solve complex problems and ensure the ease of implementation all while staying agile enough to scale up or down with your institution. Both were founded by seasoned FI experts who have hands-on experience tackling infrastructure challenges with limited tools and highly manual solutions, and transforming those processes into scalable, automated solutions.
BotDoc and Constant can deliver you flexible, customer-facing platforms that hyper-personalize based on customer input, thirdparty integrations, and sophisticated algorithms in a single session to help find the solution your customers need both in the front and back offices. Most Constant and BotDoc customers feel an early impact of 60% faster signatures and 120% increase in credit origination and loan management task turnaround time, sharing that it’s the “best technology we’ve ever implemented” and, “our LOs have never been more hungry for a tool like this.
Curious? Learn more about BotDoc’s secure file transfer service or Constant’s digital borrower loan platform today.