Why Banks are Outsourcing their Platforms

Posted by Joshua Desrochers on Dec 16, 2020 9:00:00 AM
Joshua Desrochers
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The banking industry is in a period of remarkable innovation as institutions adapt to shifting market dynamics and new emerging technologies. The rise of challenger and neo-banks has increased competition and has presented consumers with more choices than ever before. Undoubtedly, clients won’t hesitate to exercise that choice in pursuit of convenient and personalized services, especially as new open banking regulations come into effect and reduce switching costs. 

Banks today are also presented with seemingly endless opportunities to improve their services and broaden their ecosystem as partnerships with innovative fintechs and other TPPs continue to rise. Nevertheless, some banking teams still romanticize the idea of building their own digital platforms. More often than not, this approach leads to chronic delays, strained resources, blown budgets, and missed opportunities. 

Day Late and a Dollar Short

Banking teams often underestimate their project timelines. A study by
Forrester found that over half of development projects for customer-facing applications take longer than expected. Poor technology and architecture decisions are the primary cause of these delays and lead to growing technical debt. Subsequently, these systems are updated less frequently as teams struggle to keep up with bug fixes and managing dependencies. 

Beyond development, other internal stakeholders and compliance teams often delay delivery further. Now if you thought that wasn’t bad enough, consider the fact that only 12% of projects are on or under budget, while 45% are over budget by at least 25%.

While missing on time and budget are problems in and of themselves, they also lead to significant missed or lost revenue. Banks who choose to go it alone are putting themselves at a significant disadvantage to their partner-forward competitors whose time to market and speed of iteration far surpass that of their resource-strapped counterparts. Ultimately, banks who show up late to the game with an inferior product will have trouble winning new business and will continue to lose dissatisfied clients. 

This isn’t a hollow-threat; the FISPAN team sees this scenario play out every week. We regularly demo alongside our bank partners to new clients who are often fed up with their current bank’s product offering and are often swayed by the functionality we deliver. Clients are not opposed to switching banks if their primary bank does not offer a high quality, functional product. With changing expectations, the World Fintech 2020 report found that 16% of all customers, and 48% of Gen Y and tech-savvy clients, are likely to switch banks over the next 12 months, with respondents saying that their primary bank is not well integrated with other platforms or apps they use daily. In FISPAN’s case, our partner banks have seen their multi-bank clients consolidate their operational deposits and increase their payment volumes when given access to our platform. 

Why Partnerships Pay Off

Through collaboration, bank executives can reduce their organization’s technical debt and maintenance costs by diversifying the cost of research and development across multiple players. New platforms and frameworks can also be consumed and integrated as needed, helping banks reduce complexity and development time for common capabilities. It also allows developers to focus on the truly differentiating features and user experience of their applications. Collaborating means banks can provide technology to business customers while also obtaining benefits like risk mitigation functionality offered by their fintech partner. Extending commercial platforms by customizing them allows banks to differentiate the experiences that customers value, at speed, without having to write and maintain basic components and lower-level infrastructure. 

At FISPAN, we enable our banking partners to deliver a streamlined and contextual business banking experience by integrating their products and services directly into their clients’ ERP and accounting systems. We are able to deliver a market-ready solution in a matter of weeks. 

As banks continue to integrate new technologies and optimize their customer experience, those that choose to outsource platforms will enhance the quality of their customer experience, cut down on costs and ensure the products are ready for market faster than it would be if done internally.


Interested in how you can join the world’s leading banks in providing their corporate clients a friction-free banking experience that improves loyalty, increases revenue, and boosts customer satisfaction scores? Book your demo today.

Through collaboration, bank executives can reduce their organization’s technical debt and maintenance costs by diversifying the cost of research and development across multiple players.

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