To Build or Not to Build? Banks and Building versus Buying Software
5 min read | JULY 06, 2023
Money moves fast, but so does digital transformation, and in recent years, it has become a necessity for those operating within banking industries. According to a report by PwC, a notable 77% of financial institutions have identified digital transformation as their top priority, highlighting the industry’s determination to harness the power of technology to shape the future of banking and personal success. However, as financial institutions navigate this digital landscape, a crucial question arises: Should they build their technology stack or rely on third-party solutions? A report by NTT Data reveals that a significant 61% of banks prefer to construct their technology infrastructure in-house rather than opting for off-the-shelf solutions. Today, we’ll be exploring the benefits, challenges, and strategic choices banking institutions face as they navigate the intricate path to technological modernization.
Benefits of Digital Transformation
With the retirement of Baby Boomers and the rise of millennials and Gen-Zers in the workforce, there is a growing demand for instant access to relevant information (think relevant suggestions on Amazon or “Watch Next” recommendations on Netflix). With this newer digitally-native clientele generation, businesses must be equipped to provide quick and seamless access to data to meet their needs. However, as of 2021, only 54% of financial services in the U.S. have adopted cloud technology. In an industry where banks and insurance companies must navigate regulatory changes and respond swiftly to customers, easy and rapid access to data becomes a critical factor that non-cloud infrastructure struggles to deliver. But don’t just take our word for it, ample research shows that when it comes to digital transformation, its importance to the financial services industry is vital:
- 86% of financial sector consumers expressed their preference for a digital banking relationship. By offering convenient and personalized digital services, institutions can exceed customer expectations, boost satisfaction, and foster unwavering loyalty.
- Digital transformation initiatives in banking could lead to cost savings of 20-30% in operations.
- Digital transformation fortifies security and compliance in financial institutions. Cutting-edge cybersecurity solutions, encryption techniques, and identity verification systems safeguard sensitive customer data while digital processes streamline adherence to regulations like anti-money laundering (AML) and Know Your Customer (KYC) requirements.
- By leveraging data analytics, businesses can understand customer behavior, transaction patterns, and market trends, helping to maximize ROI.
To Build or Not to Build?
We’ve established that digital transformation is a necessity, so the question that remains is: to build or not to build? While banking companies may not specialize in software development, many are drawn to the idea of building their software to maintain control, customization, and alignment with their unique business requirements. Not to mention the allure of cost savings. Building software in-house undoubtedly offer a range of benefits:
- In-house software development allows banking companies to tailor solutions to their specific needs, workflows, and business requirements.
- By building software in-house, companies have full control over the development process, including timelines, features, and updates.
- Developing software internally enables companies to retain intellectual property rights, opening up potential monetization opportunities through licensing to other organizations.
- Building software in-house allows organizations to cultivate internal expertise and knowledge in software development. This can enhance the organization’s overall technical capabilities and foster innovation within the team.
- While the upfront investment for in-house development may be higher, over time, it can result in cost savings compared to purchasing third-party software licenses.
- Once the software is developed, organizations are responsible for ongoing maintenance, bug fixes, updates, and support. This requires dedicated resources and attention which can divert important efforts from revenue-generating activities.
- The continuous investment and updates needed for in-house software can be less predictable compared to purchased solutions, especially if the underlying business performance fluctuates.
- Building software in-house requires a thorough understanding of cybersecurity practices and standards. Organizations must invest in robust security measures to protect against potential vulnerabilities and cyber threats. Lack of expertise or oversight in security practices can expose the software to security breaches and compromise sensitive data.
- As business needs expand or change, organizations may face challenges in scaling the software or adapting it to new requirements. This can limit the ability to quickly respond to market demands or take advantage of emerging technologies.
- Devoting internal resources to consistent software development may divert attention and budget away from other critical initiatives, leading to challenging prioritization decisions and potential resource constraints.
Conversely, there are compelling reasons that banks should consider purchasing software:
- Buying software from external providers proves to be a cost-effective and time-efficient alternative to building it from the ground up. It eliminates the need for extensive development cycles and reduces upfront investment costs.
- External software providers possess specialized knowledge and expertise in developing solutions specifically tailored for the financial services industry. Their experience ensures a higher level of quality and functionality, addressing industry-specific requirements and regulations.
- Software vendors take responsibility for ongoing updates, maintenance, and technical support. This allows banking institutions to offload these tasks and focus their internal resources on core business activities, increasing operational efficiency.
- Off-the-shelf software often comes equipped with a comprehensive set of industry-standard features and functionalities. These pre-built capabilities cater to common needs within the financial services sector, reducing the need for extensive customization and accelerating implementation timelines.
These benefits can be further maximized by leveraging Managed Services in partnership with a qualified consultant. But what exactly is Managed Services? Let’s delve into it.
The Managed Services Advantage
Put simply, managed services are a simple and cost-effective way to support your business in whatever your goals are with digital transformation. It typically involves:
Discuss what your goals are and work with a team to define a vision and align resources with what you’re looking to achieve.
Your instance should be helping your business – not hurting it. Optimization Services analyzes your current system to ensure that it supports the objectives of your company. Industry experts can identify any areas of misused functionality and redesign the system in a way that boosts the overall productivity of your team.
Make sure that your system is up to speed and new features are being properly utilized with system support from managed service experts.
Post Go-Live Support
Move forward with confidence. Once your project is launched, experts will be there to help with any user, technical, or change management issues.
Any successful system implementation requires a strong foundation. Start off on the right foot and ensure success throughout every step with a planned approach to integrate new software into the existing workflow of an organizational structure.
Managed services experts understand that the default system needs to be tweaked to best suit your business’s unique needs and goals, which is why they can tailor configurations specific to what it is you’re trying to achieve.
Legacy System Integrations
Legacy system integration tackles the challenge of integrating information from on-premises systems into your new system without the risk of losing critical data.
Automation has infinite possibilities; it can assist with maximizing productivity, decreasing company costs, reducing errors, increasing customer satisfaction, supporting employee retention, and much, much more. Take the stress out of automation with intelligent solutions by expert-managed services providers.
Ongoing Solution Management
At the highest level, a managed services provider can offer long-term, in-house support to handle the daily operations of specialized applications and ensure end-to-end solution success.
These additional benefits only begin to scratch the surface of what is truly possible with a managed services expert leading your journey of digital transformation.
When it comes to technology integration and digital transformation, choosing the right partner is crucial. At Access Global Group, we stand out with our exceptional expertise in global deployment and the agility of a boutique firm. With over 15 years of experience across various industries and a prestigious Salesforce Platinum-level partner status, we go above and beyond to exceed the needs and expectations of your financial institution throughout the integration process. Our unique project methodology prioritizes our clients, ensuring that their requirements and aspirations drive our solutions. With extensive experience in Salesforce and the financial services industry, we are well-equipped to deliver tailored solutions that align with your business goals.
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