Should Your Bank Build Its Own Tech? Or Buy It? (Pt. 2)

April 26, 2017 Jim Young

Last week we began laying out the arguments on why your bank should scrap any plans it might have to build its own bank technology and instead look for best-in-class options from proven vendors.

In part one, we described how the best vendors develop deep knowledge and expertise by thinking about their technology products, 24/7. We also explained how the very survival of these companies hinges on delivering great service and support. Additionally, these vendors know the only way they’ll keep a customer in the future is by providing a solution that can scale as the bank grows.  

Today we have four more reasons why Buy > Build. 

4) Time to Market

The fact that you’re pondering the buy vs. build question means you’ve identified a problem at your bank. Here’s an obvious next question: How quickly do you want this problem solved?

If you opt for building the solution in-house, you’re basically answering: “Not any time soon.” You’re going to be starting from scratch on a major project and to do so, you’ll first need to make sure you can round up the necessary resources to put together a development team. Then, you’ll need to get buy-in from all interested parties on what the solution will/won’t do. And that’s before you’ve even typed in a word of code. Buckle up, because the road ahead is going to be bumpy and the trip will be a long one.

But most likely, your answer to that question is: “Yesterday.” If so, then you should look to someone who has a finished product in hand and only needs additional time to connect it to other software at your bank (more on that in a bit) and train your bankers on how to use it.

Just as with scalability, a quick and painless implementation is one of the central value props for many bank technology vendors. The ones who can deliver on the promise of getting your technology up and running with speed and precision will rise to the top of their markets. The ones who can’t, you probably won’t have to worry about, since they’ll soon be going out of business.

Of course, a big part of that implementation involves the other tools the bank is using or plans to use. That brings us to …

5) Integrations/Configurations

You never make any technology buy/build decisions in a vacuum. Each solution or tool you add is part of a bigger puzzle, something we often refer to as “The Brain of the Bank.” You can learn more on that here, but in short, the bank’s brain is the collection of systems and processes where banks make decisions that generate real value and return. That CRM you use to store all the information about customers and prospects? That’s part of the bank’s brain. So is the pricing platform you use to structure deals. As is the origination system you use to ensure that the deal moves from negotiation to closing smoothly.

Each of those systems can only come close to their potential if they’re communicating and sharing data with the other systems. That requires an integration that forms a seamless connection between the tools. And it’s much easier in theory than it is in practice.

Again, this is where the best vendors butter their bread. They have teams of developers dedicated solely to ensuring that their software will play nicely with the other tools at your bank. Thus, you’ll often hear them use the term “plug and play.” In other words, if you’ve built your bank’s brain on these systems, then the next one you purchase can essentially plug into the other tools and quickly start reaping the benefits of those synergies.

6) Evolution

There’s really no gentle way to ask this next question, so here it goes: “If your current systems were adapting and changing to meet your needs, then you wouldn’t be reading this blog post, would you?”

Flip that around from the vendor perspective: If the companies that made tech solutions for banks, weren’t constantly evolving their software, would they still be in business?

It’s really a matter of competition. When you build an in-house solution, your product needs to be better than what you had before. But that’s a low hurdle that never, ever gets any higher as time passes. Eventually, to justify its existence, your in-house solution only needs to be preferable to the alternative: going through the time and energy it takes to build a new one.

Meanwhile, the competition a technology vendor faces is fierce – and constant. Every day it is dealing with a customer who must decide whether to renew a subscription or a prospect who must decide which provider to sign on with. In that environment, it’s critical that the vendor ensures their product is worthwhile now, a year from now, and so on.

7) Security

Security is always a concern and always will be. But when it’s your in-house solution, your bank alone bears that weight on its shoulders. When you deal with a vendor, they’re the ones who spend the time and energy on the problem. And you can be certain they’ll take the issue seriously. The credibility – and ultimately the survival – of their company depends upon being able to keep your data secure.

But what about when the choice is between in-house and a SaaS vendor? Won’t your bank’s data be much safer inside your own firewalls than it would be in the “cloud”?

Not necessarily.

Determining whether a SaaS vendor could deliver the level of security that meets your standards is a straightforward process: Just ask to see their documentation. Any vendor that truly appreciates the security needs of banks will be able to provide independent audit documents under the AICPA SOC (Service Organization Control) framework. These documents show your bank what protections are in place and verify independently that the vendor is following procedures in an acceptable manner. 


Remember the cautionary tale from Part 1 about my Dad and his ill-fated attempt to paint the house with his hand-held sprayer? At the time, it seemed like a good idea. If he’d really thought things through, he could have saved time and money – and face with Mom – if he’d let painters do the job instead.

The same principal holds when it comes to bank technology. When you take the time to consider all the factors and the potential costs and benefits, the choice becomes clear. Do your research, find the right vendor, and buy the technology that will keep your bank ahead of the competition. 

 

 

 

About the Author

Jim Young

Jim Young, Director of Communications at PrecisionLender, is an award-winning writer with experience in a range of positions in media and marketing, from reporter to website editor to content marketer. Throughout his career has focused on the story – how to find it, how to understand it, and how best to share it with others. At PrecisionLender he manages the many ways in which the company shares its philosophy on banking and the power of relationships Jim graduated Phi Beta Kappa from Duke University and holds a masters degree in journalism from Columbia University.

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